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
Infringement of exclusive service area by franchisor in connection with formula change dated February 27, 2017
On 30 January 2017, the provisional relief judge of the District Court of Noord-Holland, ECLI:NL:RBNHO:2017:688 (Intertoys/franchisee), was asked how to deal with the
Forecasts at startup franchise formula
The Amsterdam Court of Appeal ruled on 14 February 2017, ECLI:NL:GHAMS:2017:455 (Tot Straks/franchisee) on the question whether the franchisor had provided an unsatisfactory prognosis and whether the
Mandatory transfer of franchise business to franchisor?
On January 23, 2017, the District Court of Amsterdam, ECLI:NL:RBAMS:2017:412 (CoffeeCompany/Dam Spirit BV) rendered a judgment on the question whether a franchisee upon termination of the cooperation
Transfer customer data to franchisor
In its judgment of 10 January 2017, ECLI:NL:GHAMS:2017:68 (OnlineAccountants.nl), the Amsterdam Court ruled, among other things, on the question of how customer data should be transferred.
Franchise Closing Sale – Who Gets the Sale Proceeds?
The judgment of the District Court of the Northern Netherlands dated 12 October 2016, ECLI:NL:RBNNE:2016:5061 (Administrator/Expert Group and Rabobank), focused on the question whether the franchisor, together with the bank,
Column Franchise+ – mr. Th.R. Ludwig: “Judge: franchisor’s duty of care comparable to that of a bank”
Various judgments in 2016 made it clear how high the standard of care for a franchisor towards its franchisees is.