Franchisee obliged to cooperate with formula change?
Franchisee obliged to cooperate with formula change?
On March 24, 2017, the preliminary relief judge of the District Court of Amsterdam ECLI:NL:RBAMS:2017:1860, again addressing the issue of Intertoys wishing to convert Bart Smit’s stores into Intertoys stores. Not only did an Intertoys franchisee demand that the intended formula change be discontinued in its exclusive catchment area, but the franchisor also claimed that the Intertoys franchisee must cooperate with the formula change.
Infringement of exclusive catchment area
Earlier, by judgment of 27 January 2017, the Interim Relief Judge at the District Court of Noord-Holland ruled in a similar case that Intertoys is prohibited from converting a Bart Smit store into an Intertoys store in an exclusive catchment area of an Intertoys franchisee. shop (for that statement, see here).
As a result, Intertoys has taken the necessary measures and has temporarily discontinued the formula change. It has further stated that it will comply with the prohibitions imposed towards the Intertoys franchisees until – in short – agreements have been made with it or clarity has otherwise been obtained through a court.
In contrast to these commitments, there is no (any longer) a sufficiently concrete threat that Intertoys will infringe the exclusivity rights of the Intertoys franchisee in question, according to the preliminary relief judge. The Intertoys franchisee therefore had insufficient interest and the claim was therefore rejected.
Participate in formula changes?
The franchisor’s counterclaim was to order the Intertoys franchisee to enter into consultations about an arrangement that would allow the Bart Smit stores in the exclusive area of the franchisee to be converted into Intertoys stores, without the Intertoys franchisee experience a negative impact below the line.
The preliminary relief judge rules that the franchisee has not been able to make a sufficiently plausible case that the franchisee, contrary to the principle that the exclusive catchment area must be respected, must be satisfied with some form of compensation.
However, circumstances are conceivable, as this preliminary relief judge considers and the preliminary relief judge in Noord-Holland has already considered, that a franchisee must grant permission for the conversion of a Bart Smit store into an Intertoys store in its exclusive catchment area in accordance with standards of reasonableness and fairness. can no longer refuse. This could be the case if there is a business economic necessity for this conversion. Intertoys does state that economic circumstances require a collective restructuring as it has initiated, but it has not yet sufficiently substantiated this assertion. For example, legitimate questions have been raised, such as about the possibility of closing the Bart Smit stores. It is also possible that the principles of fairness and fairness in a franchise relationship ultimately require a franchisee to comply with the course and results of a collective process of consultation and decision-making with all franchisees initiated by the franchisor. However, Intertoys cannot limit the subject of prior consultation to the question of what the compensation scheme should look like. The franchisor’s counterclaim is therefore also rejected.
Formula changes remain difficult and it is a careful process. It is certainly not impossible, but the interests of the franchisees involved, who could be affected by this, should certainly not be neglected.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to dolphijn@ludwigvandam.nl .
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