Post non-competition ban without a signed franchise agreement

Is a franchisee bound by a post-competition ban without a signed franchise agreement? A ruling was made on this in the judgment of the Amsterdam Court of Appeal, September 26, 2023, ECLI:NL:GHAMS:2023:2518.

A franchisee has entered into a franchise agreement for a particular location, but then opens a second location. It has been agreed with the franchisor that the turnover of both locations may be added to calculate the franchise fee, which resulted in a lower scale and therefore a lower (total) fee applying to the locations.

The franchisee then refuses to conclude a separate franchise agreement submitted. At the beginning of 2020, the parties again discussed signing a new franchise agreement for the second location. The newly submitted franchise agreement would comply with the Franchise Act. Once again the franchisee refuses to sign it.

It subsequently appears that the franchisee does not consider himself bound by a post-competition ban with regard to the second location, because there is no signed franchise agreement. The franchisor then initiates summary proceedings and claims that the franchisee is bound by the post-competition clause.

However, the preliminary relief judge considers it plausible that the statements and behavior of the parties involved mean that the provisions of the franchise agreement, including the non-competition clause, are (or have become) applicable after all. The franchisee is therefore prohibited from acting in violation of the post-competition ban.

The franchisee has appealed. The court upholds the judgment of the preliminary relief judge. In any case, the parties assumed that a franchise relationship had come into effect between them and there is no concrete basis for assuming that the franchisor should have believed that it would deviate from the standard franchise agreement as the franchisee knew and understood it. also applied to the first branch. In light of this, it is likely that the franchisor only wanted to indicate that the agreement still had to be formalized or signed in writing and that the franchisee should reasonably have understood this as such.

The Franchise Act prescribes in Article 7:922 paragraph 2 sub a of the Dutch Civil Code that a non-competition clause must be recorded in writing. The court determines that at the time of the termination in May 2022, there was no written requirement. After all, what is stated in Article 7:922 has a deferred effect until January 1, 2023. Furthermore, the court rules that the post-competition ban has indeed been put in writing in the franchise agreement (applicable between the parties).

The conclusion is that the franchisee is obliged to comply with the post-competition clause.