Impact of Franchise Act on franchise statistics minimal

By Maaike Munnik and Remy Albers

Ludwig & Van Dam attorneys has been publishing periodic franchise statistics on franchise disputes since 2008, based on all published court rulings. On October 3, 2024, Ludwig & Van Dam attorneys presented its latest research at its event ‘ Franchise statistics current affairs and trends ‘. This research focused on the question of the impact of the new legislation (Franchise Act) on case law (rulings). It was concluded that the impact of the Franchise Act on case law is statistically minimal. However, the content of case law is increasingly colored by the new legislation.

Number of (published) judgments

In the context of the investigation into the franchise statistics, we asked ourselves whether this legislation would have an impact on the number of disputes that would be submitted to the court. This is not the case. Despite the introduction of the Franchise Act on 1 January 2021, we see a stable picture of around 30-35 rulings per year in the period around this introduction (2019-2024).

Table 1: Number of published judgments per year in the period 2008-2023

Every year, the most litigation concerns clauses in the franchise agreement (28%). The judge is also regularly asked for a ruling on conflicts about a typical franchise dispute, namely (incorrect) forecasts (15%). Since the implementation of the Franchise Act, there has also been an increase in disputes about the pre-contractual phase. In the past three years, the judge ruled on this seven times.

Franchise law

Despite the fact that the Franchise Act does not seem to have any impact on the franchise statistics in terms of numbers, a trend can be observed in which the Franchise Act is increasingly part of legal proceedings. The turning point can be observed in 2023 and in 2024, more rulings have been published to date in which the Franchise Act was discussed than not. The fact that this trend is only visible two years after the introduction of the Franchise Act seems to be a logical consequence of the (long) duration of legal proceedings.

Table 2: number of rulings in which the Franchise Act was or was not invoked (up to and including 3 October 2024)

Who Wins?

The question that naturally occupies everyone in the context of the Franchise Act is whether the Franchise Act has an impact on the outcome of the procedure. Does a franchisee win more often when he invokes the Franchise Act? Over the period from 2008 to mid-2024, there is an equal distribution of profits for a franchisor (47%) and franchisee (46%). In 7% of cases, the franchisor and franchisee share the profits. In the years 2019, 2020 and 2021 (before the impact of the Franchise Act is visible in the case law), we see that the franchisor wins predominantly more cases than the franchisee, but that this difference is limited. In the years 2022, 2023 and 2024, there is a change in which the franchisee wins predominantly more cases than the franchisor, but this difference is also limited. The impact of the Franchise Act is therefore minimal, but visible.

Subject

Specifically with regard to the procedures that are conducted in which use is made of the Franchise Act, we note that proceedings are mainly conducted about the non-competition clause and the standstill period (pre-contractual phase). We see that the judge applies the standstill period (and therefore the four-week period) strictly. Various procedures have also been conducted about good franchisorship, which open standard apparently offers a lower threshold for condemning the franchisor compared to the general standard from the law: reasonableness and fairness.

Conclusion

Since the implementation of the Franchise Act, we have not seen any (substantial) changes in the franchise statistics. However, (logically) the Franchise Act is increasingly being invoked by (particularly) franchisees. Based on the figures, franchisees seem to be getting a little support. However, the figures are not convincing enough to conclude that franchisees win more cases as a result of the Franchise Act. The content of the case law is now being coloured by the Franchise Act. As a result, we see in particular that franchisees regularly invoke their rights in the context of the pre-contractual phase.

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