Franchise Councils and Franchisee Associations: A Balancing
It is now good practice to structure the consultation between the franchisor and franchisees by establishing a franchise council or a franchisees’ association, especially in larger franchise organizations. Consultation on various practical issues, as well as in some cases on policy issues, can then take place centrally and efficiently. This also creates co-determination on the part of the franchisees. When the franchise council, or the board of the franchisees’ association, is democratically elected, this can make an important contribution to the absence of a so-called fictitious employment relationship, which has already been discussed earlier in this series.
In some franchise agreements, however, the authority of the consultative body goes very far. There are situations in which the consultative body acts, for example, as an intermediary in the transfer and sale of branches of franchisees.
It also happens that the consultative body is actively involved in the allocation of exclusive areas. In such situations, a limit comes into view. The larger franchise organizations in particular can make use of some exemptions from competition law under the so-called Block Exemption Regulation for vertical partnerships. They can do this on the basis of their verticality, which means that the franchisor and the franchisee are below each other in the supply chain. However, if the franchisees are given decision-making powers among themselves, for example by means of a franchise council, with regard to important elements of the franchise agreement, in particular competitively sensitive issues such as exclusive territories, then the cooperation takes on a horizontal character, i.e. a cooperation between parties that are side by side in the supply chain, which may lead to the exemptions referred to above no longer being applicable. Care must therefore be taken to ensure that franchise councils and franchisees’ associations guarantee structured and balanced consultation, but do not acquire too far-reaching decision-making power in the ins and outs of the franchise organization as such. Adequate franchise council regulations can prevent problems in that context. In these regulations, the powers of the franchise council must be clearly and clearly described, within the applicable competition law frameworks. This naturally also applies to the articles of association of a franchisees’ association, as well as the relevant provisions in the franchise agreement.
Ludwig & Van Dam franchise attorneys, franchise legal advice
![](https://ludwigvandam.megaconcept.nl/wp-content/uploads/2020/12/232court-min-400x222.jpg)
Other messages
Franchisee may purchase a range of foreign products after mandatory formula change – June 6, 2019 – mr. JAJ Devilee
The District Court of East Brabant recently dealt with an important matter in preliminary relief proceedings in which a franchisee was completely involuntarily forced to adopt an alternative formula.
How do I keep my location? – June 6, 2019 – mr. K. Bastian
Location is of great importance to franchisors and franchisees, especially in the retail sector.
Supermarket letter – 25
Supermarket Newsletter No. 25
The benchmark for franchise forecasts – dated 29 May 2019 – mr. AW Dolphin
On 19 March 2019, the Den Bosch Court of Appeal, ECLI:NL:GHSHE:2019:1037, listed the case law of the Supreme Court on prognosis in franchising.
Franchise arbitration: too high a threshold? – mr. M. Munnik
When entering into an agreement, it is possible for the parties - contrary to the law - to designate a competent court. This also applies to the franchise agreement. Of this possibility
Franchise appeal for error due to incorrect forecasts and lack of support rejected – dated April 25, 2019 – mr. K. Bastian
The Court of Appeal of 's-Hertogenbosch ruled (ECLI:NL:GHSHE:2019:697) on the question whether the mere fact that forecasts did not materialize justifies the conclusion that the franchisee has been shortchanged...