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
Non-compete clause on the sale of a franchise business
How strict should a non-compete clause be when selling a franchise business to the franchisor? This question was raised in a dispute in which the District Court of Gelderland op
Franchisor fails by invoking a non-compete clause
Although a non-compete clause is validly formulated in a franchise agreement, a situation may arise that is so diffuse that the franchisor cannot invoke it.
Acquisitions and Franchise Interest
It will not have escaped anyone's attention, certainly in the last year it can only be concluded that the Dutch economy is once again on the rise.
Which court for a rental and franchise agreement?
Which court is competent to rule on a related rental and franchise agreement?
Interview Franchise+ – mrs. J. Sterk and AW Dolphijn – “Reversal burden of proof in forecasts honored by court”
The new Acquisition Fraud Act indeed appears to be relevant for the franchise industry, according to this article from Franchise+.
Franchisor convicted under the Acquisition Fraud Act
For the first time, a court has ruled, with reference to the Acquisition Fraud Act, that if a franchisee claims that the franchisor has presented an unsatisfactory prognosis