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
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled
Supermarket letter – 18
Can an entrepreneur be obliged to operate a different supermarket formula?
Article in Entrance: “New owner”
“The catering company where I work has been taken over. The new owner now says that I no longer have to work for him, but can he refuse me as an employee?”
Directors’ liability in the settlement of a franchise agreement
Privately, can the director of a franchisee legal entity be liable to the franchisor if the franchisee legal entity wrongfully fails to provide business to the franchisor?