Infringement of franchisee’s exclusivity rights: franchisor liable
Franchise agreements often contain exclusivity provisions that give franchisees the exclusive right to operate a business in a specific area in accordance with the franchise formula of the franchisor. Such provisions prohibit the franchisor from permitting others to use the franchise formula in the exclusive territory.
Recently, in preliminary relief proceedings (see District Court of Gelderland, 9 September 2016, ECLI:NL:RBGEL:2016:5311), litigation was brought about the consequences of a violation of the franchisee’s exclusivity right. The franchisor had entered into a franchise agreement with a franchisee (hereinafter referred to as franchisee A) who was entitled on that basis to apply the formula within a radius of 5 kilometers around the franchisee’s place of business for the duration of the franchise agreement.
Despite the agreed exclusivity, the franchisor had nevertheless concluded a franchise agreement with another franchisee (hereinafter: franchisee B) who was located at a distance of 4.65 kilometers as the crow flies. After franchisee A confronted the franchisor about this, the franchisor wrongly stated that the franchise agreement with franchisee B was concluded before the franchise agreement with franchisee A and that therefore franchisee B would have the oldest right.
However, the court in preliminary relief proceedings did not follow the franchisor’s argument and ruled that the franchisor was obliged to comply with the exclusivity provision of franchisee A. It was established in the proceedings that A had concluded a franchise agreement before B. However, according to the judge in preliminary relief proceedings, it is not relevant which agreement was entered into first, since there is no hierarchy under the law of obligations with regard to the rights that the two franchisees can derive from the franchise agreement against the franchisor. The franchisor is therefore obliged towards both franchisees to comply with the franchise agreement.
The conclusion that the judge in preliminary relief proceedings then draws from this is that the franchisor must cease the performance of the franchise agreement with franchisee B within two days. According to the judge in preliminary relief proceedings, the fact that the franchisor may become liable to pay damages to franchisee B as a result is a circumstance that must be borne by the franchisor.
Of course, a franchisor cannot grant the same right twice in respect of the same territory. He cannot grant the exclusivity right that has already been granted again. The franchisee with the oldest exclusivity right can demand successful performance, but the second franchisee will be able to claim (substantial) compensation.
The Dutch Franchise Code (NFC) requires that the area of exclusivity is inviolable. A franchisee can therefore also make use of this in the future.
mr. DL van Dam – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to vandam@ludwigvandam.nl
![](https://ludwigvandam.megaconcept.nl/wp-content/uploads/2020/12/232court-min-400x222.jpg)
Other messages
Goodwill on transfer from a supermarket
A franchisor and a franchisee lay down the agreements they make for their cooperation in a franchise agreement.
The supermarket entrepreneur himself determines the choice formula after acquiring ownership of the property
In the displacement market of supermarkets, those who have access to their own retail premises often determine which formula may be used.
Increase in franchise fee for existing and new franchise contracts
Increase in franchise fee for existing and new franchise contracts
Unlawful termination of dealer agreement
The Court of Appeal in The Hague recently ruled in a case in which an importer and distributor of a car brand had terminated an agreement with one of its dealers.
Jurisdiction of the subdistrict court in cases of misrepresentation
The assessment of disputes about a (sub)lease agreement is assigned by law to the specialist sub-district court, while disputes about a franchise agreement are, in principle, dealt with by the '
It’s right in the shopping street
It's right in the shopping street