Formula switches from administrative office

Court of Arnhem, preliminary relief judge

In the present case there is talk of an administrative office that performs administrative work for the franchisees within a certain franchise formula. The basis of this cooperation is a framework agreement from 2003 between the trust office and the franchisor. Although the framework agreement was only valid for a certain period of 5 years, after the expiry of this period the parties continued the cooperation as ‘traditional’, without concluding a new framework agreement.

Due to (among other things) complaints about the services provided by the trust office, the franchisor terminated the framework agreement at the beginning of 2010, taking into account a notice period of (more than) eight months. At the initiative of the franchisees, an extensive tendering process was also started, in which a large number of administration and accountancy firms were given the opportunity to present themselves to the franchisees. On the basis of this tender process, an accountancy firm ultimately emerged as the most suitable candidate and not the trust office.

Based on the outcome of the tender process, the franchisor has sent a letter to its franchisees calling on them to have the administrative work carried out by the accountancy firm after 31 December 2010 and no longer by the trust office. This in particular to monitor the unity within the formula. As a result, the trust office is faced with a loss of customers and has therefore filed summary proceedings against the franchisor to prevent this. As a basis for this claim, the trust office states, among other things, that the franchisor would not be free to terminate the cooperation.

For the time being, the court is of the opinion that the framework agreement has been continued indefinitely after the expiry of the original period. In such a case, in the absence of a legal or contractual arrangement regarding the termination, the reasonableness and fairness in connection with the circumstances of the case will have to determine to what extent the agreement has or has not been terminated. In principle, a reasonable notice period adapted to the circumstances of the case must then be observed. In (very) special cases, it may only be possible to cancel if there is a sufficiently compelling reason for cancellation, but that situation does not apply here, according to the court.

According to the court, it is important that the current framework agreement for an indefinite period was originally a fixed-term agreement, which has, however, been tacitly continued. Nor has it become apparent that the trust office has made any investments with a view to continuing the agreement. The court considers the difference of opinion about the quality of service relevant, as well as the fact that there has been an extensive tender process, which has shown that the trust office is not the best candidate. Furthermore, the trust office failed to take measures to deal with the consequences of the termination of the collaboration. In the opinion of the judge, the notice period of eight months is more than enough for the trust office to absorb the loss of customers. The fact that the trust office would depend on the formula for a large part of its income should remain for its own account and risk. Based on the foregoing, the court is of the opinion that the framework agreement has been legally terminated by the franchisor and that the trust office cannot reasonably take action against this.

It might have been better for both parties if a new framework agreement had been concluded after the expiry of the period of the original framework agreement, which included a clear notice period. Due to the lack of such an agreement, there was uncertainty between the parties as to whether the cancellation on the part of the franchisor was legally valid. Such ambiguity is of course undesirable and has led to unnecessary legal measures in the present case.

Mr JH Kolenbrander – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to coalbrander@ludwigvandam.nl