Switching franchisee from one franchise organization to another is not without risks

Court of Amsterdam

The court in Amsterdam recently ruled in a case where a franchisee switched from one franchisor to another, in the same industry.

Both the transferring franchisee and the new franchisor have a major responsibility in this regard. The new franchisor’s duty of care entails that the franchisor must investigate the facts and circumstances under which the franchisee is transferring. This should not only include a possible non-competition clause and its consequences, but also what the current obligations of the franchisee are towards the existing franchisor. It is insufficient if the new franchisor claims that it was not aware that there was a non-competition clause or that the transferring franchisee had outstanding obligations towards the old franchisor. If the franchisor simply cooperates in the transfer, i.e. without further active investigation, it may be unlawful towards the existing franchisor. For example, the disadvantage may be the transfer of customers from one franchise organization to another at the hands of the franchisee and the new franchisor. It does not matter that the franchisee camouflages activities by means of a private company, in which a third party, for example a family member, has formal control as the sole shareholder. This is where the court comes in.

Ultimately, the Amsterdam court concludes that both the new franchisor and the transferring franchisee are liable towards the old franchisor.

Careful consideration and an open card could have prevented all this.

 

Mr Th.R. Ludwig – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice 

Do you want to respond? Mail to ludwig@ludwigvandam.nl 

Other messages

Article De Nationale Franchise Gids: “Information obligations of the intended franchisee under the Franchise Act” – dated August 7, 2020 – mr. AW Dolphin

Although the purpose of the Franchise Act is to protect franchisees against franchisors, a number of obligations have also been laid down for franchisees.

Contractual dissolution requirements not observed? No legal dissolution of the franchise agreement – dated July 23, 2020 – mr. C. Damen

Can a franchisor terminate the franchise agreement if it has failed to comply with its own contractual requirements?

By mr. C. Damen|23-07-2020|Categories: Statements & current affairs|

Legal ban on unilaterally changing opening hours by the franchisor – July 13, 2020 – mr. J. Strong

Legislative proposal of the State Secretary which, in short, means that the shopkeeper may not be bound by unilateral changes to the opening hours during the term of the agreement.

By Jeroen Sterk|13-07-2020|Categories: Statements & current affairs|
Go to Top