Acting at the start determines the outcome of a dispute between franchisor and franchisee

In a dispute between a franchisor and a former franchisee in the field of rental of real estate, the court recently delivered an important ruling (ECLI:NL:RBOBR:2016:3752).

The franchisor sued the franchisee. Both parties mutually claimed compensation from each other and accused each other of, among other things, that the other party had violated its contractual obligations. 

The court leaves open which of the parties first violated its contractual obligations, because according to the court, the damage suffered by the parties as a result of the failure of their cooperation is in any case the result of circumstances that can be attributed to both parties . The court decides that the damage must therefore be divided between both parties.

The court then explains that both parties can be blamed for the failure of the cooperation. The franchisor could be blamed for knowing – before entering into the franchise relationship – that the franchisee  had no training in the field of mediation in the rental and letting of immovable property and did not have any relevant experience. In addition, the franchisor gave the impression in the contract that the franchisee would be transferred to the rented properties, while the franchisor knew that this was not the case. In addition, the franchisor had offered an internship of only three weeks as a start-up training, which, according to the judge, is a very meager basis for this starting franchisee. The court ruled that the franchisor must therefore have realized that the chance of success of the franchise establishment of the starting franchisee was extremely small. On the other hand, according to the court, the franchisee could have been blamed for having realized that he had no training and no relevant experience in his chosen industry and that he should have realized that a three-week internship is very short to build a successful franchise business. The court also ruled that the franchisee should have made more inquiries, carried out more thorough (preliminary) research and acted more thoughtfully when signing the franchise agreement.  

Finally, the court rules that both parties contributed approximately equally to the damage and that fairness demands that the parties bear their own damage.

The lesson of this ruling for franchisees and for franchisors is that  prior to and when signing a franchise agreement, careful and well-considered actions must be taken, in the interest of (a greater chance of) the success of the franchise relationship. This can be done by making specific inquiries in the sector, by conducting thorough preliminary research and by obtaining advice from a lawyer specialized in franchise.  

mr. J. van de Peppel – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice.

Do you want to respond? Go to vandepeppel@ludwigvandam.nl