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 in Entrance: “Company name”
“I came up with a wonderful name for my catering company and incurred the necessary costs for this. Now there is another entrepreneur who is going to use almost the same one. Is that allowed?"
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled
Supermarket letter – 18
Can an entrepreneur be obliged to operate a different supermarket formula?
Article in Entrance: “New owner”
“The catering company where I work has been taken over. The new owner now says that I no longer have to work for him, but can he refuse me as an employee?”