Transfer Arrangements in Master Franchise Agreements
Master franchise agreements are generally long-term: 20 or 25 years is no exception. Various subjects are regulated in a Master Franchise Agreement, such as the possibilities and restrictions under which the rights granted may be exploited as franchise rights, a target with regard to the branches to be opened and often (unilateral) conditions under which the Master Franchise Agreement may be terminated prematurely by the master franchisor. When the latter occurs, it is striking that most master franchise agreements usually do not include proper transfer arrangements with regard to the acquired rights.
As a result, master franchisor, master franchisee and the franchisees may be faced with abrupt and highly undesirable consequences. After all, if the master franchise agreement suddenly ends prematurely, the master franchisee’s authority to exploit the franchise rights (or have them exploited) will lapse. In other words, the franchise agreements concluded with the various franchisees are operated without right or title. It would seem obvious that a master franchise agreement would then contain an arrangement that the franchise rights are at least transferred to the master franchisor. However, most master franchise agreements do not contain such an arrangement at all. It is also important that, despite the premature termination of the master franchise agreement, the accrued franchise rights now represent a certain, often considerable value. If, in the event of premature termination, transfer would take place to, for example, the master franchiser, it is plausible to also include in the master franchise agreement that the corresponding value would accrue to the master franchisee. This is without prejudice, depending on the nature of the early termination of the master franchise agreement, to the possibility for the parties to claim damages from both sides and possibly offset this with the intended value. Such an arrangement is also generally absent in regular termination master franchise agreements. If the parties have not arranged anything in this regard, the master franchise rights can therefore be transferred to a subsequent master franchisee, without the remaining master franchisee being assured of cashing in the value of the built-up organization.
Parties are therefore advised to expressly arrange the aforementioned aspects in advance in their agreement when concluding a master franchise agreement. This provides clarity for the master franchisor, master franchisee and the franchisees and may prevent many (interim) problems.
Ludwig & Van Dam franchise attorneys, franchise legal advice
![](https://ludwigvandam.megaconcept.nl/wp-content/uploads/2020/12/232court-min-400x222.jpg)
Other messages
Franchise Act passed by the House of Representatives – dated 16 June 2020 – mr. AW Dolphin
The Franchise Act was adopted by the House of Representatives on 16 June 2020.
Sandd franchisees find satisfaction in nullifying Sandd and PostNL merger – dated 12 June 2020
The franchisees of mail delivery company Sandd went to court in November, assisted by Ludwig & Van Dam Advocaten. Court of Rotterdam rules on takeover by PostNL.
Plenary debate dated June 9, 2020 in the Lower House of the Franchise Act – dated June 10, 2020 – mr. AW Dolphin
On 9 June 2020, the legislative proposal for the Franchise Act was discussed in plenary in the House of Representatives. An amendment and a motion have been tabled.
Franchising is “a bottleneck in tackling healthcare fraud” – dated 10 June 2020 – mr. AW Dolphin
According to the various supervisory authorities in the healthcare sector, franchise constructions can be seen as a non-transparent business construction in which the supervision of professional and
Article Franchiseplus: “Franchisors participate in franchisees” – dated June 3, 2020 – mr. AW Dolphin
Franchisors are increasingly participating in the franchisee's business. There are several benefits for both the franchisee and the franchisor.
Article The National Franchise Guide – “Corona discount on rent” – dated June 2, 2020 – mr. AW Dolphin
If a rental property is obliged to be closed due to corona, there may be a right to a rent reduction, according to the Northern Netherlands court.