Silent extension
Many franchise agreements contain provisions governing the termination and possible continuation of the existing franchise agreement. It is quite often included in the franchise agreement that the agreement is tacitly renewed under the same conditions if neither party, franchisor or franchisee, cancels. Is such a regulation permissible under all circumstances?
If there is a sublease situation in which the franchisee rents from the franchisor, this is permissible in all cases as long as the sublease agreement continues and the market share of the relevant franchise organization does not exceed 30%. Please note that this market share can be regional or local as well as national.
If there is no question of subletting, tacit renewal is still possible as long as the market share of the franchise organization is below 15%. Contrary to what is sometimes thought, tacit renewal of a franchise agreement is therefore often possible in practice. It should be noted, however, that the regulation on which the possibility of tacit renewal is based for a market share of less than 15% can in theory be set aside by the court or the Netherlands Competition Authority (NMa). In a specific practical case, however, the NMa ruled that the regulation in question had to be fully respected.
When extending the franchise agreement, it is therefore really not necessary in all cases to conclude a new agreement and therefore necessarily sit down together. A simple clause that properly regulates tacit renewal for the parties is often sufficient.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Operating problems shopping centres: position of tenant different from that of franchisee
Our highest court, the Supreme Court, recently ruled on the question
End of Franchise Agreement. and then?
It is now common practice for parties to consider the consequences in detail when entering into a franchise agreement.
Recent ruling regarding fictitious employment
The question of whether there is a franchise agreement or a disguised employment contract remains under discussion
The organizational structure of a franchisor
Earlier installments of this section have already discussed the consequences of a bankruptcy
The European Code of Honor on Franchising: a guarantee for parties?
All national franchise associations, united in the European Franchise Federation, have in the 1970s
Deviation from the duration of the franchise agreement and rental agreement
It often happens that franchisor and franchisee agree between their existing (sub)lease agreement