Obligation to sell back at the end of the franchise agreement
Franchise agreements sometimes provide that the franchisee is required to sell back purchased assets at the end of the franchise agreement. What if the franchisee sold the assets to another before the end of the franchise agreement? The preliminary relief judge of the District Court of Central Netherlands ruled on this question on 29 December 2017, ECLI:NL:RBMNE:2017:6793.
Pursuant to the franchise agreement, the franchisee is obliged to purchase certain equipment for the operation of the franchise formula. The franchise agreement stipulates that the franchisee must sell the purchased equipment back to the franchisor.
The franchisee, on the other hand, argues that it sold the equipment to a third party (in good faith) which would prevent it from meeting the sell-back obligation. In that case, the former franchisee could perhaps only be ordered to pay replacement compensation in proceedings on the merits.
However, the preliminary relief judge does not believe that the former franchisee actually sold the equipment to a third party. The preliminary relief judge considers that the story of the former franchisee is implausible, partly because the sale allegedly took place to the brother of the former franchisee, the former franchisee continued to use the equipment and that the equipment was only very recently moved to the new location of the former franchisee.
The conclusion is that the former franchisee is ordered to make the equipment available to the franchisor.
mr. AW Dolphin – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
The franchisor’s duty of care in extreme times
The current credit crisis is spreading like wildfire and has already claimed many victims
Deal or no deal? The problem of broken negotiations
Before a franchise agreement is actually signed by a franchisor and a franchisee
Company Policy and Franchise Interest
Every organization of any importance sets policy goals for itself.
Is it allowed to suspend payments?
Suspension is the case when a debtor (temporarily) postpones the fulfillment of its obligations
Timely addressing parties in case of problems
What to do if you notice irregularities in your franchise relationship? It's always a consideration.
Possible pitfalls of a starting franchisee
Starting a business on the basis of "franchising" is in.