Internet sales in a franchise relationship
Internet sales are also enjoying increasing interest in conventional franchise circles. Particularly in retail, the turnover share and with it the interest in adding internet sales to the conventional formats is increasing rapidly. This phenomenon has not yet been taken into account in all franchise agreements. Particularly in those situations, the question of what is and what is not allowed arises more and more often. Is the franchisor or the franchisee free, without further agreements, to develop such activities or not? First of all, in this context, the franchisee may not be restricted in the possibilities of passive sales under competition law. The use of the internet and therefore internet sales can often be regarded as a form of passive sales. This means that the franchisor cannot simply prohibit the possibility of internet sales in the franchise agreement, or at least can only reserve this right for itself. The starting point is therefore that the franchisee must be allowed to operate its own website, provided that the internet sales are not actively aimed at sales in another issued exclusive territory or the area that is exclusively reserved for the franchisor.
Naturally, the franchisor can include rules in the franchise agreement, or preferably in the handbook, regarding the quality and formula-compliant appearance of websites and internet sales. Conversely, this is not necessarily the same. In situations where (absolute) district exclusivity has been granted, the franchisor is not automatically free to make internet sales in this exclusive district. First of all, not because the rule that passive sales must be allowed pertains to the vertical relationship from the franchisor to the franchisee and therefore does not automatically apply the other way around. If the franchisor does wish to reserve this option, it would therefore be wise for the franchisor to expressly include this in the franchise agreement. If it is not included, a discussion may arise afterwards about this form of competition by the franchisor within the exclusive territory. It is of course more obvious that the franchisor and franchisee will mainly use the possibilities of the internet to strengthen the formula. It is therefore particularly important that the (im)possibilities for this are recognized in time and that an arrangement is made for this in the franchise relationship. If such an arrangement has not been made, the franchisee may, under certain circumstances, believe that area exclusivity is being infringed improperly and file a claim for compensation for the damage suffered as a result.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
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?”
Directors’ liability in the settlement of a franchise agreement
Privately, can the director of a franchisee legal entity be liable to the franchisor if the franchisee legal entity wrongfully fails to provide business to the franchisor?
Column Franchise + – mr. Th.R. Ludwig: “Towards strict liability”
The Supreme Court recently ruled in a prognosis issue.
Article in Entrance: “Rentals”
“The landlord increased the prices of the property every year, but he hasn't done this for 2 years, maybe he forgets. Can he still claim an overdue amount later?”
No valid appeal to non-compete clause in franchising
On 28 February 2017, ECLI:NL:RBGEL:2017:1469, the provisional relief judge of the District Court of Gelderland ruled on whether a franchisee could be bound by a non-compete clause.
Structurally unsound revenue forecasts from the franchisor
On 15 March 2017, the District Court of Limburg ruled in eight similar judgments (including ECLI:NL:RBLIM:2017:2344) on the franchise agreements of various franchisees of the P3 franchise formula.