Penalty obligation for the franchisor for failure to comply with the franchise agreement
In a judgment of 9 November 2016, ECLI:NL:RBROT:2016:8667 (Coffeeclub2015), the Rotterdam District Court ruled on a case in which the franchisor had dissolved the franchise agreement because it was not possible to realize the agreed locations for exploiting the franchise agreement, because the necessary permits were not granted. The franchisee, however, saw this as an established obligation of the franchisee because it was precisely the location permits that were the reason for entering into the franchise agreement. The franchisor had tried to achieve this, but failed. The franchisor argued that there was a best efforts obligation. However, the franchise agreement stipulated that the franchisor “will” realize two locations. The normal meaning of the terms used here – in particular the imperative “will” – points to the existence of an obligation of result, according to the court.
The franchise agreement stipulates that the party that fails to comply with the franchise agreement is obliged to pay a penalty. The franchisor had not achieved the agreed result and was held liable by the franchisee for the penalty obligation. That fine had now risen to € 44,750. The franchisor is ordered to pay the entire penalty because no valid reason has been provided by the franchisor for the lack of payment.
The franchisor is further required to compensate the franchisee for the loss of gross margin. The court rules that other costs must also be deducted from the gross margin, such as car costs and costs of the accountant. The costs of coffee machines, coffee carts, etc. can also be considered. The franchisor is ordered to pay damages, to be drawn up by the state.
This judgment once again shows the need to pay close attention to the meaning of what is now being agreed when drawing up a franchise agreement.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to dolphijn@ludwigvandam.nl
Other messages
Circumvent post non-compete clause in franchising
On 3 April 2018, the Court of Appeal of Arnhem-Leeuwarden, ECLI:NL:GHARL:2018:3128, overturned an interim injunction of the District Court of Gelderland on competitive activities.
Column Franchise+ – “Prohibition of sales via internet platforms in franchise agreement exempt from cartel prohibition”
At the end of last year, Thuisbezorgd.nl incurred the wrath of many meal delivery companies by announcing another rate increase. The standard rate of Thuisbezorgd.nl thus reached a
Column Franchise+ – Franchisor acts unlawfully by providing a forecast through a third party
Disputes about forecasts between franchisor and franchisee remain a hot topic in franchising. After the Street-One judgment, it seems that franchisors feel safe
Column Franchise+ – Outsourcing forecasting to an administrative office does not benefit the franchisor
Disputes about forecasts between franchisor and franchisee remain a hot topic in franchising. After the Street-One judgment, it seems that franchisors feel safe
Outsourcing prognosis to an administrative office does not benefit the franchisor
Disputes about forecasts between franchisor and franchisee remain a hot topic in franchising.
Contribution Mr. AW Dolphijn in Contracting magazine 2018, no. 1: “The unilateral amendment clause in the franchise agreement.”
A contribution by mr Dolphijn has been published in the magazine Contracteren entitled: “The unilateral amendment clause in the Franchise Agreement”.