Entitlement to goodwill compensation for franchisee established – mr. AW Dolphijn – dated December 30, 2021
On December 22, 2021, the District Court of Rotterdam ruled for the first time, as far as is known, that a franchisee is entitled to a goodwill compensation, as referred to in the Franchise Act. The ruling has not (yet) been published.
The Franchise Act stipulates that under certain circumstances a franchisee may be entitled to compensation for goodwill. See Article 7:920 paragraph 1 of the Dutch Civil Code. Although the Franchise Act stipulates that the franchise agreement must contain a goodwill arrangement no later than 1 January 2023, the court ruled that this already applies in the relevant case.
The franchise agreement regarding a service formula had ended after the agreed term had expired. The customer base belonged to the franchisee. However, just before the end of the franchise agreement, the franchisor had informed the franchisee’s customers that the services provided by the franchisor would be continued, that the franchisee’s staff would be taken over and that the entire service would therefore remain unchanged. The former franchisee was not compensated at all by the franchisor. The court deems this contrary to law. An expert will have to determine the size of the goodwill value, for which the franchisor must advance the costs of the expert’s report.
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl
Other messages
Obligation to sell back at the end of the franchise agreement
Franchise agreements sometimes provide that the franchisee is required to sell back purchased assets at the end of the franchise agreement.
Supermarket letter – 20
Uncertain legal position of Emté franchisees
Position of franchisees in franchisor restructuring
Franchisees must be adequately and generously informed in advance by the franchisor about the content and consequences of (further) agreements...
Interview Franchise+ – mrs. J. Sterk and AW Dolphijn – “Reversal of burden of proof in forecasts approved by court” – February 2018
The new Acquisition Fraud Act indeed appears to be relevant for the franchise industry, according to this article from Franchise+. Alex Dolphijn of Ludwig & Van Dam assists a franchisee in a
Article Franchise & Law No. 7 – Franchise agreement as general terms and conditions
Uniformity of the franchise formula and (therefore also) uniformity of the agreements with the franchisees will often be of great importance to the franchisor.
The franchisee’s customer base
If the partnership between a franchisee and a franchisor ends, the question of who will continue to serve the customers may arise.