For various reasons, franchisors and franchisees are confronted with the (desire to) transfer the rights under the franchise agreement to another party. The acquiring party is often confronted with unwilling franchisees, fueled by uncertainty. Recent examples are the transition from Super de Boer to Jumbo/C1000 and the imminent transition from Totaal Gemak to Cigo. This is often accompanied by the transfer of the main tenancy rights, which means that franchisees/sub-tenants often feel compelled to also apply the new landlord’s formula. The question is whether the franchisee is obliged to cooperate in this?
First of all, the change of the formula must be distinguished from the transfer of rights under the franchise agreement and the rental agreement itself. In principle, the individual transfer of rights under an agreement requires the legal consent of the other party, according to the franchisee/lessee. The exception to this is a collective transfer through (legal) merger and/or demerger. However, objections are also possible here, but that goes beyond the scope of this contribution. However, this individual consent may also have been given in advance in the franchise agreement itself. A good franchise agreement contains a balanced arrangement in this regard. In principle, the same applies to the transfer of the (sub)lease agreement to a subsequent (sub)landlord/franchisor. A legally valid transfer requires the consent of the franchisee/sublessee. The sublease agreement does not transfer automatically through the transfer of the main tenancy rights. The adage “buy does not break rent” does not apply here. If franchisors do wish to reserve this right, a provision to that effect must therefore also be included in the sublease agreement in advance, or the property portfolio must be taken over by merger and/or division.
The franchisee’s consent is free of form and can therefore also be tacit or deduced from facts and circumstances. If the franchisee does not agree, it is therefore wise to explicitly protest against this and the franchisee can, in principle, claim compliance with the franchise and rental agreement against the original (sub) lessor/franchisor.
Then the formula change. The transfer of the rights under the franchise agreement does not alter the fact that it must be fully complied with in terms of content. Changing the formula is therefore only possible insofar as the franchise agreement itself provides scope for this. With regard to this point too, it is therefore recommended that the franchise agreement be set up accordingly. Such a unilateral reservation of change must of course not be unreasonable.
It follows from the above that the transition to a different formula and franchisor requires permission in accordance with the legal guarantees, so that one cannot simply be confronted with another contracting party. This is a consequence of the principle of freedom of contract. The transition should therefore be a process of negotiation. The economic side of the matter in particular will also be decisive for the will of both parties to renew the cooperation. In fact, this process differs little from the pre-contractual phase prior to the initial franchise agreement. Here too, it is therefore important to draw up careful forecasts with regard to the (changed) conditions and investments, as well as the expected (additional) income, in relation to possible divestments. If both franchisor and franchisee are aware of this, the mutual opposition that such change processes often provoke can make way for thinking in terms of opportunities and possibilities.
Ludwig & Van Dam franchise attorneys, franchise legal advice