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
Jumbo refuses to convert C1000 and claims the franchise company
An apparently remarkable outcome about a C1000 franchisee, of which the preliminary relief judge of the court in Amsterdam
Franchisor hinders litigation – An unbalanced arbitration clause
It has been agreed in a franchise agreement that disputes will be settled by arbitration, to be held in New York, in the English language.
DA Drugstore head office clashes hard with franchisees
DA Drugstore head office clashes hard with franchisees
Competing without a non-competition clause?
The franchise non-compete obligation remains a source of dispute.
Non-competition clause set aside; big consequences
Non-competition clause set aside; big consequences
Judgment association of franchisees versus franchisor regarding the roll-out of an alternative franchise formula
Judgment association of franchisees versus franchisor regarding the roll-out of an alternative franchise formula