Extension under “the then applicable conditions”
Many franchise agreements contain a franchise renewal clause that allows the franchisee to re-exercise the franchise for another five years, provided that the franchise agreement is accepted “on the terms then in force”.
Does this somewhat cryptic formulation constitute a license for a franchisor to unilaterally change the conditions, i.e. the content of the new franchise agreement, when the contract extension is up for discussion? By no means. It has been established in case law that a franchisor is certainly not free to freely change the conditions in the new franchise agreement in accordance with its own insight and policy in the event of a contract renewal. For example, if a higher fee is suddenly requested, this means that the option granted can in practice only be invoked under such additional conditions that this is more than the franchisee could expect. The conduct of the franchisor in question described here may then be unlawful.
Does this mean that a franchisor cannot change his franchise agreement at all in the event of a contract renewal if the above option is included in the franchise agreement? Not that either. The franchisor can indeed change and add to various subjects in the franchise agreement. However, it is important to reach consensus in advance with the existing franchisees, for example in consultation with the franchise council. In this way, surprises in the event of a contract extension for existing franchisees are eliminated in advance and a clear situation is created long before any contract extension that benefits everyone.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.
Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.