Reinvestment / restyling within an existing franchise concept.
In practice, we have recently seen more and more developments that point to a conversion/restyling of the franchise organization, for which the franchisee must reinvest.
An important question in such a situation is whether the existing franchise agreement offers the possibility of realizing such a conversion/restyling of the entire franchise organization?
If a provision is included in the existing franchise agreement from which, in short, it follows that the franchisee can be obliged, at the franchisor’s request, to cooperate in a “collective conversion/restyling” of the organisation, then the franchisee can (in principle) must also be adhered to. It is important here who is expected to bear the costs for the conversion/restyling.
If the franchisee is expected to make a significant contribution to this, it is important that the franchisor preferably provides forecasts that are geared to the new situation, in order to be able to take the consequences of the conversion into account. This is all the more pressing now that this situation can be compared with the situation of the so-called pre-contractual phase. After all, even in the situation of a major restructuring of the organization, the franchisor must cover the investments to be made by the franchisees with the necessary care obligations.
If a reinvestment is of a limited nature, a prognosis may be omitted, although in such a situation a franchisor should also ask himself to what extent the reinvestment will have a negative effect on the franchisee’s organisation. If it is a considerable investment, the franchisor should, as already stated above, ask himself whether the investment actually leads to an improvement in turnover or whether a loss of turnover is prevented. In addition, the requested investment must be justified in relation to the operating result of the franchisees involved. In short, this must be done with the necessary caution and policy. This will be discussed in more detail in one of the following articles.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Article The National Franchise Guide – “Corona discount of 50% on the rent” – mr. AW Dolphijn – dated September 15, 2020
Disappointing turnover due to the corona crisis may mean that the rent is halved, even if the rent is partly turnover-related.
Article Franchise+ – “Franchisor uses “derivative formula” (without his knowledge)” – mr. AW Dolphijn – dated September 9, 2020
Many franchisors will not be aware of the fact that they use a "derived formula" as referred to in the Franchise Act.
Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement?
Article Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.