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
Other messages
Unauthorized unilateral collective fee increase by the franchisor
In an important decision of the Amsterdam Court of Appeal of 23 April 2014, the question was whether a franchisor was allowed to implement an increase in a contribution.
Interests Association of Franchisees of the Netherlands (BVFN) is in further consultation with the Minister
On April 16, 2014, the previously announced meeting between the Belangen Vereniging Franchisenemers Nederland (BVFN) and the Ministry of Economic Affairs took place.
Exoneration of duty of care with the franchisor’s prognosis
In a judgment of the Overijssel court of 9 April 2014, the interesting question arose whether a collaboration should be qualified as a franchise.
Non-competition clause is lost in summary proceedings
Recently, the preliminary relief judge in Rotterdam ruled that a franchisee was not bound by the non-competition clause included in the franchise agreement.
Advance on compensation after an unsound prognosis
In a beautifully substantiated summary judgment of the Northern Netherlands Court of 9 April 2014, the question was whether an advance should be paid for the damage assessment procedure.
Collection point requires shopping destination
In my supermarket newsletter of July 11, 2013, I already predicted that the establishment of collection points for goods ordered via the internet would set the judicial pens in motion.