Formula change not justified – dated October 23, 2018 – mr. AW Dolphin
On 12 October 2018, ECLI:NL:RBNHO:2018:8884, the preliminary relief judge of the District Court of Noord-Holland ruled again on the issue in which Intertoys wishes to convert Bart Smit’s stores into Intertoys stores, within the exclusive catchment area of an Intertoys franchisee. See here for the discussion of the comparable judgments of 30 January 2017 and 24 March 2017. The central issue in the franchise agreement is the exclusive service area of an existing Intertoys franchisee and the franchisor’s prohibition to allow other Intertoys branches within it. In the opinion of the preliminary relief judge, this also includes the prohibition on converting a Bart Smit store located within it into an Intertoys store.
The preliminary relief judge considers it conceivable that reasonableness and fairness in a franchise relationship entail that a franchisee must comply with a decision by the franchisor to change the franchise formula as at issue here. According to Intertoys, this is all the more pressing because the vast majority of franchisees recognize the importance and necessity of the actions of Intertoys and Bart Smit and support them. Also the franchisees who operate in an overlap area. Intertoys has achieved a tailor-made solution with almost every one of them. Of the 23, 5 have not yet been arranged or laid down in writing.
However, according to the preliminary relief judge, the obligation of a franchisee to comply with a decision by the franchisor to change the franchise formula requires at least that the outcome is a properly organized and conducted collective process of consultation and consultation by the franchisor. decision-making by/with all involved franchisees. The preliminary relief judge is of the opinion that the process followed in this case does not meet these conditions. This is because Intertoys has opted to achieve tailor-made solutions in bilateral negotiations with each individual franchisee. Under those circumstances, Intertoys may require that the franchisee in question also arrives at reasonable solutions through negotiations. However, Intertoys cannot deny the entitlements under the franchise agreement, certainly not as long as it has not been established that the franchisees have not acted reasonably in the negotiations.
A franchisor’s wish to amend the franchise agreement will by no means always succeed. I wrote about this in Contracting magazine, which article can also be downloaded.
mr. AW Dolphijn – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to dolphijn@ludwigvandam.nl
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