Can a franchisor increase the interim franchise fee and change the formula? – mr. AW Dolphijn – dated January 21, 2022

A franchisor must be able to adjust the franchise formula from time to time in order to innovate and anticipate changes in the market. Interim changes in the franchise formula and revenue model that are to the detriment of the franchisee may be justified. On 5 January 2022, the Midden-Nederland District Court, document ECLI:NL:RBMNE:2022:1, ruled in a matter that the franchisor’s changes to the franchise formula and revenue model were justified, even though the franchisees were at a disadvantage. experience.

These proceedings concerned a number of independent advisers (franchisees) who mediate in the conclusion of agreements between their customers and Volksbank (the franchisor), trading under the name Regiobank.

As of October 1, 2020, the legal relationship between the parties has changed and Regiobank’s intermediary formula has been designated as a ‘full franchise’. In short, the participating advisors in the full-franchise formula are obliged to (i) offer all of Regiobank’s products and services to their customers, (ii) comply with the location and appearance requirements of Regiobank and (iii) meet minimum production requirements.

The commitment of the franchisees in these proceedings is to revive the legal relationship that applied between the parties until October 1, 2020. They believe that the change due to the introduction of the full-franchise formula has major negative financial consequences for them, that their position as independent advisors is severely curtailed and that ending the relationship, the only alternative, will leave them empty-handed.

The court rules that the formula change to the full-franchise formula has been (further) developed in consultation with the representatives of the franchisees, and that it has not become apparent that franchisees are (disproportionately) affected financially. In that context, the court also ruled that it is characteristic of a franchise formula that a franchisor sets conditions to ensure its uniform application. A franchisee must be recognizable as such and is also expected to act in the interest of the franchisor. This also follows from the legal definition of the franchise agreement, which means that the franchisor can oblige franchisees to ‘operate the formula in a manner designated by it’ (Section 7:911(1) of the Dutch Civil Code). The franchisor is therefore in principle free to set minimum production requirements and to make the remuneration dependent on – in short – the performance of the franchisees. The franchisees were unsuccessful.

When changing a franchise formula, there is a trade-off between innovation and uniformity of the formula by the franchisor and, on the other hand, individual and collective interests of franchisees. Disagreements and incorrect expectations can quickly escalate into disputes, as in this case.