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
Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.
Termination of franchise agreement in case of changes in leased retail space – September 27, 2019 – mr. AW Dolphin
Termination of a franchise agreement in light of a substantial change in the leased retail space.
Article De Nationale Franchisegids: “Distribution of (potential) customers prohibited?” – September 17, 2019 – mr. AW Dolphin
Within many franchise organizations, agreements are made about the recruitment of (potential) customers in a certain area.
District protection no protection against termination due to urgent own use – dated September 17, 2019 – mr. AW Dolphin
As a landlord, can the franchisor terminate the lease for urgent own use, in the sense of district protection, while this would be excluded on the basis of the franchise agreement.
Unreasonable compensation at the end of the franchise agreement – dated September 17, 2019 – mr. AW Dolphin
Some franchise agreements stipulate that the franchisee always owes the franchisor a minimum of a certain amount of costs upon termination of the franchise agreement.