If your franchisor is your competitor
Franchising aims at cooperation. The franchisor should assist the franchisee in achieving mutual benefit from the operation of the formula. Sometimes this gets out of balance. What if the franchisor starts to compete with the franchisee?
In principle, a franchisor is not allowed to compete with its own franchisees. After all, that is contrary to the idea behind the franchise cooperation. Competition from your own franchisor is not always obvious.
Competition by the franchisor can take several forms. It is obvious to establish a branch in the franchisee’s market area. There is also the possibility of facilitating the arrival of someone else who is competitive. For example, the franchisor may rent a retail space to a third party who is a competitor of the nearby franchisee.
What often happens is that the franchisor reserves the right to be the only one to have a web shop, while the franchisees are obliged to promote the web shop. If the franchisee does not share in the revenues, this can also be unlawful.
It also happens that the same franchisor starts a second formula that is competitive. It is then bitter if the franchisor puts all his energy into this second formula and uses the fees paid by the franchisees of the first formula. The franchisor may also not trade the core range that the franchisees have co-developed and which has been sold to the format.
Franchisees must be alert to competition from their own franchisor and, where necessary, appeal against injustice.
mr. AW Dolphijn – franchise lawyer
Ludwig & Van Dam Advocaten, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl
Other messages
Article Franchiseplus: “Franchisors participate in franchisees” – dated June 3, 2020 – mr. AW Dolphin
Franchisors are increasingly participating in the franchisee's business. There are several benefits for both the franchisee and the franchisor.
Article The National Franchise Guide – “Corona discount on rent” – dated June 2, 2020 – mr. AW Dolphin
If a rental property is obliged to be closed due to corona, there may be a right to a rent reduction, according to the Northern Netherlands court.
Article Franchise+ – Franchisees enjoy the same protection as employees and commercial agents with regard to a non-competition clause – dated 7 May 2020 – mr. RCWL Albers
It often happens that, especially by franchisees, the validity of a post-contractual non-compete clause is considered too lightly.
The support agreement for the Retail sector in this Corona crisis – dated 15 April 2020 – mr. K. Bastian
On April 10, 2020, the Ministry of Economic Affairs, together with a number of landlords, retailers and banks, reached a support agreement.
Court rules that corona crisis does not constitute force majeure – dated April 10, 2020 – mr. AW Dolphin
If payment cannot be made due to a decrease in income, then there is not always a force majeure situation.
Important information for directors of franchisees associations: Online meetings and decision-making in times of corona – dated April 10, 2020 – mr. J. Strong
Emergency law provisions for legally valid decisions without physically meeting within the association structure.