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
Other messages
Update Franchise Law
On 23 May 2018, the government indicated that it would prepare a legal regulation that creates a framework for four sub-areas of cooperation between franchisors and franchisees that are crucial
On the edge of a franchisee’s exclusive territory
The Court of Appeal of Arnhem-Leeuwarden ruled on 15 May 2018, ECLI:NL:GHARL:2018:4395, on the question whether a franchisor has a branch just over the edge of the exclusively granted protection area.
Can a franchisee cohabit with a competing entrepreneur?
Can a franchisee violate a non-compete clause by cohabiting with someone who runs a competing business? On January 12, 2018, the District Court of Central Netherlands ruled
Not an exclusive catchment area, but still exclusivity for the franchisee
The judgment of the District Court of Noord-Holland dated 18 April 2018, ECLI:NL:RBNHO:2018:3268, ruled on the exclusivity area of a franchisee.
Supermarket letter – 23
AH may not reduce wages when taking over personnel from AH franchisees;
Termination or dissolution of the franchise agreement by the franchisee
In principle, franchise agreements can be terminated prematurely, for example by cancellation or dissolution. On 21 March 2018, the District Court of Overijssel ruled on ECLI:NL:RBOVE:2018:1335 on