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
Burden of proof reversal in forecasting as misleading advertising?
In an interlocutory judgment of 15 June 2017, the District Court of Zeeland-West-Brabant, ECLI:NL:RBZWB:2017:3833, ruled on a claim for (among other things) suspension of the non-compete clause.
Fine for franchisor because aspiring franchisee is foreigner
On 5 July 2017, the Council of State, ECLI:NL:RVS:2017:1815, decided whether, in the case of (proposed) cooperation between a franchisor and a prospective franchisee, the franchisor
Article in Entrance: “Company name”
“I came up with a wonderful name for my catering company and incurred the necessary costs for this. Now there is another entrepreneur who is going to use almost the same one. Is that allowed?"
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled