Transfer Arrangements
Franchise agreements typically include transfer arrangements that cover the following:
the franchisee’s business is primarily offered to the franchisor; if the franchisor does not wish to take over the franchisee’s business within a reasonable period of time, the franchisee may offer the business to another. Such schemes have many variants and additions.
In the first place, it is important that the agreement states that if the franchisor does not wish to take over the franchisee’s business, the business in question will not be offered to any acquiring franchisee on different terms. If this is not included in the agreement, it can be argued that making another offer to the franchisor is unlawful.
In addition, transfer arrangements often include the possibility that the franchisor must, so to speak, approve the acquiring franchisee. In other words, the franchisor must give consent to the acquiring franchisee before the selling franchisee can actually transfer the business in question. The question then arises as to which requirements the franchisor may test. Specifically, he may not reasonably withhold his approval. A special duty of care of the franchisor lies in the fact that a sustainable perspective must be offered for the benefit of the acquiring franchisee. After all, the transfer situation is comparable to a pre-contractual phase, in which a candidate franchisee may also rely on the expectations raised by the franchisor, which in practice are usually reflected in an adequate investment and operating forecast.
A possible complication in the transfer may be that the amount paid for the company in question is so high that it can become difficult to guarantee a profitable operation for the coming years. Should the franchisor then prevent the acquiring franchisee from entering into a contract? There are certainly arguments in favor of this, among other things from the franchisor’s specific duty of care towards the franchisee. To prevent this problem, it could be considered to include in the franchise agreement that transfer is also dependent on prior approval from a reputable financing institution. In this way it is prevented that unfinanced goodwill leads to a problem for the acquiring franchisee and the franchise organization in general.
Ludwig & Van Dam franchise attorneys, franchise legal advice
![](https://ludwigvandam.megaconcept.nl/wp-content/uploads/2020/12/232court-min-400x222.jpg)
Other messages
Article Franchise+ – “Franchise statistics 2019: decline trend continues, caused by the Franchise Act?”- mr. J. Sterk, mr. M. Munnik and mr. JAJ Devilee
Since 2007, Ludwig & Van Dam attorneys have been periodically ...
Signing a Franchise Agreement in the Digital Age – Mr. K. Bastiaans – dated December 14, 2020
Within today's society, under the guise of 'the new normal', digitization is increasing. The court will discuss in more detail the manner in which an agreement is accepted and the consequences.
The sale of tobacco at supermarkets will be banned in 2024. What are the constraints and opportunities for the supermarket business? – mr. C. Damen – dated December 8, 2020
To promote and discourage smoking cessation, the sale of tobacco in supermarkets will be banned in 2024.
Franchise Act will take effect on January 1, 2021 – mr. AW Dolphijn – dated December 3, 2020
The Franchise Act was already adopted on July 1, 2020, but it has now also been established by Royal Decree that the Franchise Act will enter into force on January 1, 2021.
Supermarket newsletter -29-
Supermarket newsletter -29-
Article Franchiseplus: “Divide the pain” – mr. Th.R. Ludwig – dated December 1, 2020
The corona crisis has brought many franchisors and franchisees into ...