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 Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.
Article De Nationale Franchise Gids: “Information obligations of the intended franchisee under the Franchise Act” – dated August 7, 2020 – mr. AW Dolphin
Although the purpose of the Franchise Act is to protect franchisees against franchisors, a number of obligations have also been laid down for franchisees.
Legislative text of the Franchise Act – dated July 24, 2020 – mr. AW Dolphin
The legal text of the Franchise Act was published in the Staatsblad on 1 July 2020. The full legal text reads as follows:
Law Franchise – dated July 23, 2020 – mr. AW Dolphin
The Franchise Act will have a considerable impact on both franchisors and franchisees.