Franchise agreements and horizontal cooperation
Franchise agreements are, by their nature, so-called vertical in nature. This means that there is a vertical cooperation between the franchisor, the one who makes the franchise formula available, and the franchisee, the one who exercises the franchise formula. This is generally seen as a collaboration between two different links in the supply chain.
In addition, we know of cooperation between competitors in practice. We call this horizontal cooperation. In terms of competition law, considerably less is allowed within a horizontal collaboration than in a vertical collaboration, based on regular franchise agreements. On the basis of a common franchise agreement, it is permitted to stipulate matters such as exclusive purchasing, price recommendation arrangements, non-competition clauses, etc. between franchisor and franchisee. All these arrangements are not or hardly permitted in the case of cooperation between competitors. In the case of a collaboration between competitors, one should think of a partnership of, for example, two or more greengrocers who jointly make agreements with regard to the subjects mentioned above. If these agreements take place on a joint, for example cooperative basis, the legislator only allows such cooperation to a very limited extent. This is completely different with a franchise relationship. The topics mentioned here can indeed be properly constructed on the basis of a franchise agreement between franchisor and franchisee. In practice, of course, there must actually be a vertical relationship: cooperation between competitors may not lead to an artificial franchise construction with the aim of stipulating vertically what is actually not possible horizontally.
When setting up a franchise construction, the parties are advised to carefully check in advance whether there is cooperation between the parties or whether there is a franchise concept actually made available by a franchisor. If the latter is the case, the way is open for a construction that is permissible under competition law, based on a common franchise agreement.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
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.
Termination of franchise agreement in case of changes in leased retail space – September 27, 2019 – mr. AW Dolphin
Termination of a franchise agreement in light of a substantial change in the leased retail space.
Article De Nationale Franchisegids: “Distribution of (potential) customers prohibited?” – September 17, 2019 – mr. AW Dolphin
Within many franchise organizations, agreements are made about the recruitment of (potential) customers in a certain area.
District protection no protection against termination due to urgent own use – dated September 17, 2019 – mr. AW Dolphin
As a landlord, can the franchisor terminate the lease for urgent own use, in the sense of district protection, while this would be excluded on the basis of the franchise agreement.
Unreasonable compensation at the end of the franchise agreement – dated September 17, 2019 – mr. AW Dolphin
Some franchise agreements stipulate that the franchisee always owes the franchisor a minimum of a certain amount of costs upon termination of the franchise agreement.