Supreme Court confirms permit sale of franchisee outside exclusive district
High Council
Franchisee acquires and sells outside its territory, in territories not yet issued to other franchisees. Franchisor objects to this state of affairs and requests them to stop this subject to dissolution of the franchise agreement. The parties will make further agreements on how to deal with the problem. Ultimately, this results in a conflict in which the franchisor dissolves the franchise contract out of court. During a court hearing, both the franchisor and the franchisee argued that the franchisee was allowed to work in territories that had not yet been assigned to anyone. In the end, the franchisor’s argument that the franchisee was not allowed to do this does not hold up either in court or in the highest instance, i.e. the Supreme Court.
NB: Franchisor and franchisee need not even have agreed that the franchisee was allowed to operate in territories that had not yet been allocated, unless otherwise agreed in this context. On competition law grounds, a franchisee is always permitted to do this and in principle a franchisee may not be restricted in this, unless a nuanced arrangement, for example reserving the areas for the franchisor itself, has been agreed between the franchisor and the franchisee.
Mr Th.R. Ludwig – Franchise lawyer Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to ludwig@ludwigvandam.nl
Other messages
Franchise Board Rules
In practice, various forms of consultation circulate between franchisor and franchisee.
Developments in competition law
Some time ago, the Netherlands Competition Authority (NMa) made a groundbreaking ruling that is of great importance to all franchise organizations in the Netherlands.
Transfer Arrangements
Franchise agreements usually include transfer arrangements
The right to the formula name upon termination of the franchise relationship
In practice, discussions regularly occur when the franchise relationship is terminated between a franchisor and one or more franchisees
The possibility of actively or not actively recruiting customers outside
Based on the relevant regulations, active recruitment activities by the franchisee are permitted
Customers, clientele and exceptions thereto
Some franchise constructions have the characteristic that the products or services in question are only supplied to certain consumers.