Article De Nationale Franchisegids: “Judge again rules in favor of Domino’s franchisees” – dated September 3, 2019 – mr. RCWL Albers

At the beginning of 2018, almost all franchisees of Domino’s and the Association of Domino’s Pizza Franchisees submitted two issues to the court in Rotterdam. On the one hand they oppose the change of their exclusive (service) area imposed by Domino’s and on the other hand against the obligation imposed by Domino’s to operate a lunch concept.

As early as January 9, 2019, the court ruled that Domino’s is not authorized to unilaterally reduce the exclusive (service) area of ​​franchisees in the event of an extension of the franchise agreement.

On August 28, 2009, the court also ruled in favor of the franchisees in the dispute regarding the mandatory exploitation of the lunch concept. Briefly, the issue boiled down to the following. 

Domino’s has been trying for several years to force its franchisees to open their doors during lunchtime. To this end, Domino’s invokes the provisions in the franchise agreement that include a provision regarding the establishment of opening hours, as well as the provisions in Domino’s handbook: the Managers Reference Guide (hereinafter: ‘MRG’). Extended opening hours have been included in this MRG since (probably) 2008. The franchise agreement stipulates that franchisees must comply with the provisions in the MRG.

There are three types of franchise agreements in circulation:

1. Agreements that do not include opening hours;

2.Agreements in which the opening hours are determined at (from) 4:00 PM;

3.Agreements in which the afternoon opening hours are included.

With regard to the latter agreement, the court considers that in principle there is no room for a (general) exception requested by the franchisees to these times included in the agreement. This requires an individual assessment of the circumstances of the franchisees concerned.

Regarding the versions 1. and 2. does the court rule that franchisees should not have taken into account when concluding the franchise agreement that Domino’s would oblige them to open during lunch hours because:

– Since its introduction in the Netherlands (1989), Domino’s has had opening hours between 4:00 PM and 10:00 PM;

– Domino’s has never applied or maintained the (extended) opening hours in the Netherlands included in the MRG;

– Domino’s has been focused on offering evening meals from the start in the Netherlands until a few years ago;

– There is no explicit provision in the franchise agreement that the franchisees must open their establishment during lunchtime.

In short, according to franchisors, Domino’s is not free to simply determine other opening hours for their franchisees (barring limited changes). In cases such as the present one in which the opening hours are extended from six to more than ten hours a day, a franchisor will have to have explicitly included a provision to this effect in the franchise agreement. A unilateral power to determine opening hours alone is not sufficient. Especially not when it comes to a formula that has used the same opening hours for many years and thus focuses on a specific segment (dinner instead of lunch). If a franchisor nevertheless wishes to implement such substantial changes under comparable circumstances, the consent of the franchisees will therefore be required.

Click here for the published article. 

 

mr. RCWL Albers – Franchise Attorney

Ludwig & Van Dam Franchise attorneys, franchise legal advice.

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