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
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.
Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.