Cost price that is too high as a hidden franchise fee
An interim judgment of the District Court of The Hague dated 30 August 2017, ECLI:NL:RBDHA:2017:10597 (Happy Nurse), shows that the court considered the question whether the cost price charged by the franchisor to the franchisee was correct.
The franchise system is as follows. The personnel mediated by the franchisees enter into an employment contract with the franchisor and are paid by the franchisor. The franchisor invoices the hirers for the hours worked. After withholding a franchise fee, the franchisor also passes on the amounts received from the hirers to the franchisees.
The franchisees independently determine the rate for the staff to be borrowed. This rate includes a cost price. The cost price must be determined by the franchisees themselves on the basis of the so-called “wage cost price conversion factor”. This “wage cost conversion factor” is determined annually by the franchisor. Among other things, that component does not excel in transparency.
The franchise agreements that the franchisor concludes with the franchisees are materially similar to the franchise agreements that another franchise organization (Olympia) has concluded with its franchisees. In the judgment of the Court of Appeal of The Hague on 12 January 2016, ECLI:NL:GHDHA:2016:256 (J&P Consultants/Olympia), it was determined, among other things, that, insofar as the compensation for the cost price paid by the franchisees, in retrospect, the actual exceeds the cost price, this has been paid unduly (Article 6:203 paragraph 2 of the Dutch Civil Code) and can therefore be reclaimed by the franchisee.
The court follows this judgment and rules that a reasonable interpretation of the franchise agreement means that it is impermissible if the franchisor, by charging an excessive cost price, has created a second (hidden) franchise fee in addition to the franchise fee.
The court has not yet been able to determine whether there has actually been an excessive cost price charged and indicates that it intends to have this further assessed by experts.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
Burden of proof reversal in forecasting as misleading advertising?
In an interlocutory judgment of 15 June 2017, the District Court of Zeeland-West-Brabant, ECLI:NL:RBZWB:2017:3833, ruled on a claim for (among other things) suspension of the non-compete clause.
Fine for franchisor because aspiring franchisee is foreigner
On 5 July 2017, the Council of State, ECLI:NL:RVS:2017:1815, decided whether, in the case of (proposed) cooperation between a franchisor and a prospective franchisee, the franchisor
Article in Entrance: “Company name”
“I came up with a wonderful name for my catering company and incurred the necessary costs for this. Now there is another entrepreneur who is going to use almost the same one. Is that allowed?"
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled