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
Not a franchise agreement, but a general cooperation agreement
The Franchise Act offers franchisees various protective provisions. Earlier, the ...
Albert Heijn has to divest 5 Jan Linders stores
Jan Linders becomes an Albert Heijn franchisee and will therefore ...
Agreed early termination of the franchise agreement
A franchise agreement is usually concluded for a specific period ...
No obligation to use a rental property as a supermarket
The Arnhem-Leeuwarden Court of Appeal has made a decision on ...
Rent indexation unrealistically high
Does an agreed rent indexation always apply? The District Court ...
Clarity pays off
Clarity pays off Many agreements sometimes use vague definitions ...