Transfer of the franchisor
Most franchise agreements include a comprehensive transfer arrangement for the benefit of the franchisee, detailing how the franchisee may transfer its business to a third party if it so desires. However, the franchisor can also transfer his company, although franchise agreements often contain little or nothing about this. A provision that sometimes recurs is that the franchisor is free to transfer his business to a third party, provided that this does not affect or encumber the rights of the franchisees in any way. That is of course also correct and summarizes the point in a nutshell: ideally, a franchisee will not notice a takeover or sale of the franchisor’s business.
However, this does imply that both the selling party and the acquiring party must realize that the rights of the franchisees cannot actually be challenged. Incidentally, this is a principle that arises from contract law itself and therefore also applies if the franchise agreement does not expressly contain a provision to that effect. In practice, it sometimes happens that franchise organizations are transferred to third parties while there are conflicts within that organization between the franchisor and one or more franchisees. Perhaps unnecessarily, it should be noted in that context that the transfer of the franchise organization does not imply the end of that conflict. It is then one of the two: either the acquiring party will in so many words, made known to the franchisee(s) involved, also “take over the conflict”, or the selling party will declare in so many words that it is responsible for the further settlement of the that conflict, in both cases including the settlement of any compensation obligations and the like. In this context, it is good franchising practice to inform all franchisees, including those involved in the conflict, of the intended transfer and its consequences in a timely manner, in the broadest sense of the word, so that both the business operations in a broad sense the franchisees, as well as the handling and further settlement of the conflict as a result of the acquisition.
Ludwig & Van Dam franchise attorneys, franchise legal advice
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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.
Contractual dissolution requirements not observed? No legal dissolution of the franchise agreement – dated July 23, 2020 – mr. C. Damen
Can a franchisor terminate the franchise agreement if it has failed to comply with its own contractual requirements?
Legal ban on unilaterally changing opening hours by the franchisor – July 13, 2020 – mr. J. Strong
Legislative proposal of the State Secretary which, in short, means that the shopkeeper may not be bound by unilateral changes to the opening hours during the term of the agreement.
No right to extension of franchise agreement – July 6, 2020 – mr. AW Dolphin
Can a franchisor refuse to renew the franchise agreement if the franchisee does not agree to amended terms of a new franchise agreement?