Can a franchisee cohabit with a competing entrepreneur?

Can a franchisee violate a non-compete clause by cohabiting with someone who runs a competing business? On 12 January 2018, the Court of Central Netherlands, ECLI:NL:RBMNE:2018:1641, rendered a judgment on this question. 

A franchisor had entered into a franchise agreement with a franchisee. The collaboration was then cast in a different legal construction, whereby the formula was made available to the franchisee as part of the collaboration in a limited partnership.  The new agreement included a non-compete clause.

According to that clause, the franchisee was prohibited, among other things, during the term of the agreement, from working directly or indirectly, independently or in employment or in the form of a company, or from having financial or business interests in activities or from working. be in a company that is competitive or similar. 

The court ruled that the franchisee had directly and indirectly violated the non-compete clause, including by interfering with another company that performs activities that are virtually identical to those of the clinics according to the franchisor’s formula. This interference was apparent, for example, from the fact that the franchisee had until recently cohabited with the owner behind the aforementioned competing company. This person had also responded on behalf of himself and on behalf of the franchisee (in the “we” form) to the letters that the franchisor had written to the franchisee about the collaboration. 

A non-compete clause can stretch further than might at first sight be the case. 

mr. AW Dolphijn – franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .