Late notification that no franchise agreement will be concluded
On 11 April 2017, the Court of Appeal of Amsterdam-Leeuwarden, EQLI:NL:GHARL:2017:3104, not only assessed the question of whether the termination of negotiations on a franchise agreement to be concluded was unlawful, but also whether the franchisor was sufficiently has broken down.
In the first instance, the District Court of Gelderland ruled on 6 May 2015, EQLI:NL:RBGEL:2015:4708, that it was clear in advance to the aspiring franchisee that 9 steps would have to be completed in order to eventually become a franchisee. See my earlier comment on that statement here.
While going through the necessary steps, the shares in the franchisor are taken over by another party. The new policy is that no new franchisees will be recruited. Going through the next steps to reach a franchise agreement is therefore terminated by the franchisor. The court ruled in favor of the franchisor. The Court of Appeal follows that view of the District Court.
However, the court ruled that the subject of the dispute is not only the termination of the franchise agreement negotiations, but that other conduct during the negotiations could also be unlawful. The franchisee’s contention is that the franchisor must have known shortly after acquiring its stock that there was a new policy not to hire any more new franchisees. Nevertheless, the aspiring franchisee would only be made clear to the aspiring franchisee after a considerable period of time that it would not come to a franchise agreement. According to the court, the aspiring franchisee has been kept on the line for too long, which is contrary to social decency. The Court of Appeal refers the case to a damage assessment procedure to determine the extent of the damage.
This ruling shows that although breaking off negotiations may be justified, the way in which this breaking off is implemented may be contrary to social decency.
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
Article De Nationale Franchisegids: “Distribution of (potential) customers prohibited?” – September 17, 2019 – mr. AW Dolphin
Within many franchise organizations, agreements are made about the recruitment of (potential) customers in a certain area.
District protection no protection against termination due to urgent own use – dated September 17, 2019 – mr. AW Dolphin
As a landlord, can the franchisor terminate the lease for urgent own use, in the sense of district protection, while this would be excluded on the basis of the franchise agreement.
Unreasonable compensation at the end of the franchise agreement – dated September 17, 2019 – mr. AW Dolphin
Some franchise agreements stipulate that the franchisee always owes the franchisor a minimum of a certain amount of costs upon termination of the franchise agreement.
Legal Franchise Statistics 2019: slight decrease in number of franchise disputes
In 2018, 44 judgments were published on Rechtspraak.nl, 12 of which were appeal cases and one in cassation (a prognosis issue against Albert Heijn).
Article De Nationale Franchisegids: “Judge again rules in favor of Domino’s franchisees” – dated September 3, 2019 – mr. RCWL Albers
At the beginning of 2018, almost all franchisees of Domino's and the Association of Domino's Pizza Franchisees submitted two issues to the court in Rotterdam.
Article De Nationale Franchisegids: “The interim termination of the franchise agreement” – August 12, 2019 – mr. JAJ Devilee
A franchise agreement can end prematurely in many ways.