Franchise Act passed by the House of Representatives – dated 16 June 2020 – mr. AW Dolphin

The Franchise Act was adopted by the House of Representatives on 16 June 2020. The
The main points of the bill include the following: 

1. The recruitment of franchisees

The draft Franchise Act requires franchisors to recruit
of franchisees to provide all relevant information. A
there is no such hard rule now. As a franchisee with
has disappointing results, a discussion may arise or
the franchisor must provide all relevant information to the franchisor in advance
franchisee and should not have been at risk
ways. The concept of the Franchise Act aims to prevent that
franchisees are insufficiently informed by franchisors.

It will be of great importance to the franchisor and the franchisee
properly document which questions they have asked back and forth and on
which way they are answered. Disagreement about this is a source of
conflict. That will be the commercial aspects of the recruitment and negotiation
not always relaxed.

2. The cooling-off period for the aspiring franchisee

For providing the information when entering into a
franchise agreement will soon apply. Four weeks prior to
the conclusion of a franchise agreement should contain all possible relevant
information has been communicated to the prospective franchisee. Within that
period, the proposed cooperation may not be changed. So there is allowed
no (other) agreement can be concluded between the parties. The target
of the proposed rule is to create a cooling-off period. With that
the entrepreneur is given the time and the peace to consider the offer carefully.
Not only can so hasty and ill-considered decisions become
prevent, also time can be used to seek advice from
experts.

However, it is also conceivable that entrepreneurs do not always need a month
to make a good decision. Sometimes speed is required, for example
because people are also in the race to rent a retail property. The aspiring
The franchisee must then be able to act decisively with the franchisor
act together to ensure that the race to rent it
retail property is won, but in that race it is also clear what the
agreements between franchisee and franchisor. Duty one
observing the cooling-off period may therefore be at the expense of obtaining
a good location. Then it is only detrimental to the parties
during that period you are not allowed to do anything at all.

3. Prospective franchisee must conduct research (or have it done).

The bill emphasizes personal responsibility
of the prospective franchisee to ensure that he has passed all the
franchisor properly understands the information provided.

The franchisee is therefore almost obliged to pay all submitted de
to have contracts legally screened. Aspiring franchisees should
should use this reflection period to, for example, make financial estimates
to calculate properly and to be well informed about
liability risks. Franchise agreements are for non-attorneys
moreover, often difficult to read, so that franchisees only realize afterwards
realize what they are committed to. Unfortunately, we’re getting into this
practice a lot. A franchisor is also faced with such a situation
of course not waiting.

4. Mandatory Assistance by the Franchisor

The franchisor is obliged to provide assistance as well as commercial and
technical support’ to the franchisee. Granting
assistance may consist of providing support to the franchisee
through continued commercial and technical assistance by the franchisor
to achieve a win-win situation. This obligation can be indicated
as a duty of care of the franchisor and could be all the more onerous
as the franchisee’s dependence on the
franchisor is greater.

The proposed regulation aims to promote a win-win situation. It
transfer of knowledge and skills by the franchisor to create a win-win situation
to achieve and maintain is of course an important starting point
franchising.

5. Right of Consent of Franchisees

Franchisees are given a certain right of consent. The bill
stipulates that changes that the franchisor wants to make and that
potentially significant impact on the franchisee’s operation
may only be made with the consent of the franchisee
implemented. It happens with almost all formulas that periodically the
house style changes, investments in software and inventory are required,
or that other measures are prescribed by the franchisor.
On the other hand, it is a unilateral sudden increase of the franchise fee, without
valid reason, of course not something that should just be possible.

If franchisees unite, the proposed arrangement will offer better
means to arm oneself against the implementation of undesirables
amendments. On the other hand, the right of consent can also be paralyzing
innovation of the formula works, especially in the case of one
conflict situation.

6. No competing formula, without permission

In principle, the franchisor will not be allowed to operate any other formula that
wholly or largely corresponds to the franchise formula that the
operating franchisees. This requires the consent of the franchisees
required.

Franchisees don’t get very excited when the franchisor has a
exploit another formula that may compete with the existing one
formula. However, there may also be advantages for franchisees involved
such as economies of scale and reduction of purchase prices. Fits here then
also advanced reasoning.

7. Restriction of the prohibition of competition after the end of the cooperation

A prohibition on competition after the end of the cooperation is only possible
if it has been agreed in writing, if the know-how of the
franchisor is limited to one year after the end of the
cooperation and limited to the franchisee’s area of ​​operation such as that
applied under the franchise agreement.

8. More emphasis on good agreement goodwill

There will be rules about the franchise business and the end of the
franchise agreement. Sometimes in practice there is no appointment at all
about goodwill. Once a franchisee has built up a customer base,
but after the end of the franchise agreement, this customer base no longer exists
is allowed to use, then the question is how to deal with this. The
franchisor can take advantage of this by taking advantage of this
built customer base. The franchisor may further believe that
the customers are not connected to the franchisee, but to the formula.

According to Ludwig & Van Dam attorneys, it is good that there is an incentive
is given to think in advance about what will be at the end of the
franchise agreement will apply. The same goes for how to deal with
any claims to goodwill.

9. Mandatory consultation between franchisee and franchisor

The law also says that franchisors and franchisees must at least once a
discussing cooperation for years. Now there is no legal one
consultation obligation. It is not clear who should take the initiative for the consultation
determined exactly, but it seems that at least the franchisor
must make sufficient efforts to negotiate with the franchisee
to go. A legal obligation to consult will in any case be one
be an incentive to sit down with each other periodically. All for this
the points mentioned could be discussed during the consultations to be held.

It should be the intention of the franchisee and franchisor to
conducting consultations does not only remove misunderstandings and disagreements
to leave, but above all also to creatively investigate how the collaboration
can lead to even greater success. A legal consultation obligation will
can contribute to this. On the other hand, there is also a danger in the
regulations. With the legal provisions at the ready, may differ
of insight may also escalate more easily if the intended consultation does not
leads to solutions.

To the Senate

After approval by the House of Representatives, there is no law yet. The bill
will be forwarded to the Senate. The Senate will surrender
bend the proposal and possibly make changes and nuances. If
the bill has also been accepted in the Senate, it goes to it
Cabinet of the King for signature by the King and publication in
the Official Gazette.

mr. AW Dolphijn – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl