Post non-competition ban on services and sales franchise
When a franchise agreement ends, many franchisees encounter a prohibition in the franchise agreement to perform similar work for a certain period of time thereafter. Such a post-non-competition ban can sometimes be extremely onerous. On the other hand, it has not been agreed for nothing.
The District Court of Rotterdam ruled in preliminary relief proceedings (ECLI:NL:RBROT:2018:9610) on the question of whether a franchisee could still escape the prohibition of competition after the end of the franchise agreement.
Protection of know-how and assistance provided
The franchisee wrongly argues that no know-how was transferred. This transfer would be evidenced by training, meetings and updates. With reference to the Pronuptia judgment (CJEU 28 January 1986 no. A161/84, ECLI:NL:XX:1986:AC9213), the court rules that, in addition to know-how, assistance provided by the franchisor in the application of the (commercial) methods may be protected by means of a non-compete clause.
Know-how in service and sales franchising
In contrast to sales franchising, service franchising means that the franchisee could have acquired the necessary knowledge (entirely) for the provision of those services. In those cases, a non-compete clause could then be set aside because hardly any know-how has been transferred. This is the case, for example, in the judgments of the District Court of Overijssel of 22 June 2016 (ECLI:NL:RBOVE:2016:2914) and 21 September 2016 (ECLI:NL:RBOVE:2016:3742). However, in the present case there is talk of sales franchising.
Analogy to labor law
The franchisee referred to the rules in employment law. Article 7:653 paragraph 4 of the Dutch Civil Code stipulates that an employer cannot derive any rights from a non-competition clause if the termination or non-continuation of the employment contract is the result of seriously culpable acts or omissions on the part of the employer. It is common ground that the present case does not involve an employment contract, but a franchise agreement. So the comparison does not hold.
Unreasonably onerous general condition
Under certain circumstances, provisions in franchise agreements may qualify as general terms and conditions if they are designed to be incorporated into a number of agreements, with the exception of clauses that indicate the core of the performance. If the non-competition clause could be qualified as a general condition, it could perhaps be affected due to unreasonable objection. However, the preliminary relief judge rules that the non-compete prohibition is indispensable for the protection of the know-how transferred by the franchisor and the assistance provided that there is a core clause.
Conclusion
In this case, the franchisee was bound by the prohibition of competition after the end of the franchise agreement. However, a non-competition prohibition is not inviolable in all cases. For example, if no know-how has been transferred and no assistance has been provided. This is apparently more likely to be the case with service franchises than with sales franchises. However, this is by no means a hard rule.
mr. AW Dolphin – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl
![242Foto-doorlichten-fr.org](https://www.ludwigvandam.nl/wp-content/uploads/2020/12/242Foto-doorlichten-fr.org_-scaled.jpg)
Other messages
Column Franchise+ – 50 percent more franchise lawsuits
The 2018 Legal Franchise Statistics published by Ludwig & Van Dam Advocaten shows that there has been a 50% increase in the number of judgments in court cases rendered in 2017 compared to
A closer look at the intention to introduce franchising legislation
On May 23rd, State Secretary Mona Keijzer informed the House of Representatives about the imminent franchise legislation. The National Franchise Guide previously published this article.
Consumer Protection Applies to Franchisee
The consumer enjoys broad protection on the basis of the Civil Code.
Update Franchise Law
On 23 May 2018, the government indicated that it would prepare a legal regulation that creates a framework for four sub-areas of cooperation between franchisors and franchisees that are crucial
On the edge of a franchisee’s exclusive territory
The Court of Appeal of Arnhem-Leeuwarden ruled on 15 May 2018, ECLI:NL:GHARL:2018:4395, on the question whether a franchisor has a branch just over the edge of the exclusively granted protection area.
Can a franchisee cohabit with a competing entrepreneur?
Can a franchisee violate a non-compete clause by cohabiting with someone who runs a competing business? On January 12, 2018, the District Court of Central Netherlands ruled