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 regarding the question of whether and to what extent the departing franchisee(s) is/are entitled to continued use of the formula name. This discussion arises in particular in the event that a collective of franchisees part ways with the franchisor and in particular when all franchisees of the organization are involved in such a case. The reasoning is often that it is the franchisees who have made the name what it is. If the departure of the franchisees is also due to (alleged) attributable shortcomings on the part of the franchisor, then the idea takes hold that, certainly against that background, the franchisees have the right to continue using the name.
Of course, it happens that departing franchisees set up a new organization under the name of the franchisor they just left. However, this should be based on corresponding agreements. If there are none, then it is the franchisor who is and remains the rightful claimant to the formula name. The franchise agreement often also contains a provision to that effect. This is not affected by the fact that the franchisor in question did not adequately comply with the franchise agreement or, in general, in the opinion of the franchisees, did not function as a good franchisor. A nuance in this regard may be that, in a specific case, the franchisor has not adequately ensured the trademark protection of the name. If that is the case, a situation could arise in which the franchisees register the name as a trademark with the Benelux Trademark Register. In practice, however, such a situation will not easily arise, since a good franchisor naturally ensures adequate protection of its format name and, as stated, the provisions of the franchise agreement stand in the way of such a course of action.
In conclusion:
In almost all cases, therefore, leaving the organization means giving up the name of the formula.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.
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.