Non-competition clause
Franchise agreements more than once include a non-compete clause with respect to the period after the franchise agreement has been terminated. This period is usually one year after the contract has been terminated and the franchisee concerned must, in short, refrain from activities that are competitive with the activities of the franchise organization during that period. As discussed in this section, for example, such non-compete clauses must comply with various rules. For example, the non-compete clause must fit into the competition law regime in which the franchise organization finds itself, partly depending on its market share.
Furthermore, the non-compete clause must pass the civil law reasonableness test. Each of those topics can fill several contributions like this one. This contribution draws attention to the fact that non-compete clauses must at all times be formulated with the utmost care and that when formulating a non-compete clause, the franchisor must also carefully envision what is intended, in particular which activities exactly during the period after contract termination should be prohibited. Recent case law once again shows that the court interprets a non-compete clause, which incidentally derives from employment law practice, extremely restrictively and, when assessing it, analyzes the clause in a grammatical manner. In general, it is therefore not sufficient to “explain” a non-compete clause, to act “in the spirit” of the provisions of the non-compete clause or the like. If a non-competition clause is to have the intended effect, it will have to be literally grammatically and linguistically determined what is intended by the clause. It is therefore important to make sure of this in advance, in order to avoid unpleasant surprises afterwards.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Webshops in franchise relationships
According to data published by Statistics Netherlands in January 2016
Between Forecasts and Expectations in Franchising – February 9, 2016 – Mr. AW Dolphin
Between forecasts and expectations in franchising
No non-compete violation by franchisee – February 9, 2016 – mr. AW Dolphin
No non-compete violation by franchisee
Entree article: “Changing the flag; the ins and outs of franchise deals in the hotel industry” – mr. AW Dolphijn – February 2016
Article in Entree: "Changing the flag; the ins and outs of franchise deals in the hotel industry"
No compensation of goodwill in franchise agreements? – January 28, 2016 – mr. AW Dolphin
No compensation of goodwill in franchise agreements?
Supermarket letter – 12
Court of East Brabant issues (interim) judgment in long-running conflict of the Van De Huijgevoort brothers against Jumbo