Merged franchisor competes with proprietary franchisees
If a franchise organization is taken over, the intention may be that it is phased out in order to be integrated into the acquiring party. The question then is how to deal if potential customers flow from the franchisees of the acquired franchise organization to the new organization. The Midden-Nederland District Court ruled on such a matter on 29 July 2022, ECLI:NL:RBMNE:2022:3148.
Funeral organization Yarden has been taken over by competitor Dela. Yarden’s franchise organization and formula is being phased out to be integrated into Dela. Yarden’s customer contact center and phone number are at some point operated and handled by Dela. The services of Dela are also promoted in Yarden’s social media. As a result, Yarden’s franchisees suffer damage. The franchisees argue that Yarden competes with its own franchisees by referring to its (new) group company Dela.
Yarden stated that these are incidental errors, that effective measures have now been taken and that compensation is offered for the errors. The franchisees state that the errors and referrals continue. Furthermore, Yarden states that it cannot do much about the errors, but that it would be due to other organizations within its group, such as Yarden Uitvaarten BV
The court agrees with the franchisees and believes that the errors are not incidental, and that Yarden, as a franchisor, cannot hide behind the actions of affiliates. The court orders Yarden, as the franchisor, to cease referrals to Dela, under penalty of a penalty.
This judgment shows that the process of changing a franchise formula requires due diligence, which was lacking in this case.
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl
![109Alex-groot.nw_.2020.jpg](https://www.ludwigvandam.nl/wp-content/uploads/2020/12/109Alex-groot.nw_.2020-scaled.jpg)
Other messages
Recommendations by the franchisor in general terms are permitted – dated March 6, 2020 – mr. AW Dolphin
The boundary between praise in general terms on the one hand and culpable deception and misrepresentation on the other remains a difficult issue.
Article De Nationale Franchise Gids – Know-how decisive for scope of application Franchise Act – dated 5 March 2020 – mr. RCWL Albers
It will have escaped the attention of few in the sector that on 10 February 2010 the legislative proposal for the Franchise Act was submitted to the House of Representatives.
Column Franchise+ – A conflict can be prevented, just communicate well – February 2020 – mr. AW Dolphin
Formula changes are a fascinating topic. It is often the subject of conflicts, but those conflicts can be avoided.
Collection fraud results in franchisor 4 years in prison and a fine of € 7 million – dated 25 February 2020 – mr. JAJ Devilee
In a highly exceptional criminal case, the court recently sentenced one of the directors of a (former) franchisor to imprisonment and a fine.
Bill Franchise Act
Legislative proposal for the Franchise Act to the House of Representatives
Article De Nationale Franchise Gids – Bankrupt because the franchisor refused to sell the franchise company – dated January 28, 2020 – mr. AW Dolphin
Can a franchisor refuse to sell a franchise business to a prospective buyer, even if it is a last resort for the franchisee?