Unauthorized unilateral collective fee increase by the franchisor
In an important judgment of the Amsterdam Court of Appeal of 23 April 2014, ECLI:NL:GHAMS:2014:249 (Spare Ribs Express/Franchisee), the question was whether a franchisor was allowed to increase a contribution. The franchisor had asked the franchisees for an increase in the marketing contribution for 2009, 2010 and 2011. The Franchisees, including the franchisee in question, had always agreed to this. When the franchisor asked franchisees for another increase for 2012, the franchisee in question voted against at the franchisees’ meeting, while the majority of franchisees voted in favour. The franchisor established the majority decision and claimed payment of the increased contribution from the refusing franchisee.
In the first instance, the franchisee pointed out the lack of contractual authority to proceed to a unilateral increase and was proved right.
On appeal it is established that the franchise agreement does not provide for a commitment to decisions of the majority of franchisees. There is also no other contractual unilateral authority to increase the marketing contribution.
The franchisor points out, among other things, that a lot has changed since the conclusion of the franchise agreement in 1997, such as the size of the franchise organization and the importance of (internet) marketing, which means that marketing must be conducted at a national level in order to stay ahead of the competition. to stay. Reference is also made to the great franchise chain interest, which means that the interest of the franchise formula prevails over the individual interests of the franchisees. In view of that interest, according to the franchisor, an amount is required for national marketing activities that is so high that it cannot reasonably be financed from the regular franchise fee.
The Court considers that it is not inconceivable that the additional effect of reasonableness and fairness will lead to a payment obligation being assumed in the interest of the franchise formula and/or the collective of franchisees, without there being a contractual basis for this. However, the franchisor’s arguments do not convince the Court of Appeal. In doing so, the Court apparently refers in particular to the statement that the necessary marking activities could not be paid for from the regular franchise fee.
Needless to say, the Court of Appeal also considers that if and insofar as the franchise agreement stipulates that the franchisor would be entitled to unilaterally increase the marketing contribution, this would not be reasonable in the present case either. can stand, given the foregoing.
This judgment once again shows the need for a well-designed franchise agreement. If the franchisor wants to be able to unilaterally implement an increase in a financial contribution, at least after the majority of the franchisees have agreed to this, then it is important to stipulate this carefully formulated in the franchise agreement. Even then, in certain cases, reasonableness and fairness may render the clause inoperative. Franchisees are well advised to be critical of proposed increases, even if the majority of the franchisee is in favor of an increase, or if this authority is explicitly stated in the franchise agreement.
Mr AW Dolphin – Franchise attorney
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Mail to dolphijn@ludwigvandam.nl
Other messages
The Real Intentions of the Parties to a Franchise Agreement – Mr. C. Damen – dated November 23, 2020
What really was the idea of the parties when they concluded a franchise agreement?
Circumventing the prohibition of competition in the franchise agreement – mr. AW Dolphijn – dated November 10, 2020
A non-competition clause in a franchise agreement is often experienced as objectionable by franchisees, especially if the non-competition clause also applies after the franchise agreement has expired.
Article Franchise+ – “How do I get rid of my debts: Also for franchisees and franchisors” – mr. AW Dolphijn – dated October 20, 2020
A reorganization may also be necessary for franchisees and franchisors who are in financial difficulties in order to continue to exist.
Article De Nationale Franchise Gids: “Reinvestment obligation for franchisees has limits” – dated October 13, 2020 – mr. RCWL Albers
In practice, it often happens that franchisors choose to renew their franchise formula and the appropriate image
Judge anticipates Franchise Act: no mandatory formula change (without threshold value)
The District Court of Amsterdam ruled that a Blokker franchisee is not obliged to renovate the store in accordance with the latest formula principles, as instructed by Blokker.
Interview Mr. J. Sterk and mr. C. Rutten in Franchise+: “Call to the automotive sector: prepare yourself well for the new Franchise Act” dated October 2, 2020
The new Franchise Act has a broad effect, also in the automotive sector. But are people aware of it enough?