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
Supermarket letter – 8
Incorrect prognosis from Albert Heijn to ex-C1000 franchisee
Urgent interest in summary proceedings
In the event of legal disputes, it is possible to request the court to take provisional measures by means of summary proceedings.
Suspension of the fee by the franchisee is not in itself an automatic ground for suspension of goods deliveries by the franchisor
The court in Assen recently ruled that a franchisor had wrongly suspended the deliveries of goods.
Codification or self-regulation in the franchising sector
Codification or self-regulation in the franchising sector
Tenancy law and franchise: approval of deviating terms in the tenancy agreement, despite material infringement and the lack of an equal social position between the tenant and landlord
Tenancy law and franchise: approval of deviating clauses in the lease.
Business transfer franchisee: franchisor properly facilitates franchisee in settlement
On November 12, 2014, the District Court of Rotterdam ruled in a case between the franchisor and the franchisee about the lawfulness of the termination of the franchise agreement.