Amsterdam Court of Appeal restricts franchisor’s appeal to non-competition – dated July 6, 2020 – mr. T. Meijer

The Amsterdam Court of Appeal ruled on June 30, 20202 that a
franchisor has no (unlimited) recourse to a contractual agreement
competition prohibition. A franchisor who reasonably does not
has an interest in invoking a non-competition clause, a former
franchisee for violation of such prohibition. 

In this matter, a franchise agreement has been established between a
former pediatric nurse and a children’s home care formula. At the time
of the signing of the agreement there was another
franchisee is active, but this is soon afterwards out of the formula
stepped. From that moment on, the franchisor has served the Northern Netherlands
from its own branch and the franchisee has South Netherlands as
her work area. Since the franchisee because of her
qualities has grown very fast, her company is even bigger
than that of its franchisor. Of a vertical proportion
due to the size and layout of the formula at any given time according to it
court no longer. Parties are at the end of the
contractual term entered into consultation with each other about the cooperation
otherwise and to continue working together on an equal footing.
The parties have not been able to reach agreement on this. On behalf of the
the franchisor has been informed by its lawyer that the franchise agreement
would be tacitly renewed and that the former franchisee kept
would be to continue paying the franchisor fee. If not already
case, the franchisor has summoned the franchisee to do so
use of the franchisor’s trade name and is an appeal
made on the contractual prohibition of competition, which meant that the
franchisee for a period of one year
children’s home care organization should strike.

At first instance, the court held that between the parties
indeed a non-competition would be in force, which the
(former) franchisee would have violated. The franchisee is
liable for damages to be demonstrated by the franchisor
as a result of the violation of this prohibition. On appeal it has
However, the Amsterdam Court of Appeal listened to the arguments of the
former franchisee and the franchisor’s claims in full
turned down. The Court of Appeal followed the franchisee’s argument
that the franchisor has not taken any steps to operate
enter into the territory of the franchisee, let alone that they
demonstrated that a new franchisee would be placed here.
In fact, there was no evidence at all for the existence of one
franchise organization.

The Court of Appeal is of the opinion that the franchisor was unable to do so
demonstrate that it has an interest in relying on the contractual
non-competition. For that reason, the Court of Appeal has the interest of the
former franchisee in continuing its business more heavily
weighed. It considers an appeal to a contractual non-competition clause under
those circumstances to the standards of reasonableness and fairness
unacceptable. The claims of the franchisor are therefore
completely rejected.

This judgment is in line with previous case law, in which it has been established
that invoking a contractual non-competition clause serves to protect the position
of a franchise formula. However, since here actually
there was no longer a franchise relationship and so did the franchisor
has not been able to demonstrate that there was an interest to be protected by law
the Court of Appeal has invoked the prohibition of competition in this matter
deemed unacceptable.

mr. T. Meijer – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Want
you respond? Go to meijer@ludwigvandam.nl