Collection of a claim need not result in a hardening of the franchise relationship

Since the entry into force of the Extrajudicial Collection Costs Decree, entrepreneurs are bound by stricter rules regarding the charging of collection costs. For example, the amount depends on the scale determined by Order in Council and the (consumer) debtor, to protect against unreasonable payment terms, is given a period of fourteen days in which to still proceed to payment, against simultaneous notification of the amount of the amount then due. This regulation not only applies to the business-to-consumer relationship, but also to the business-to-business relationship. An important nuance here is that the law provides the possibility to deviate contractually from this regulation in business relationships. However, it must be explicitly acknowledged that both parties have a purely business relationship.

It is usually agreed in a business context that the amount of the collection sum will be increased. This is usually set at 15% of the principal, which percentage is historically determined. The deviating agreements are often included in the general terms and conditions.

However, the parties would do well to record their deviating agreements in the agreement. This creates a certain awareness between the parties for the agreements made. In addition, any disputes are prevented in the unlikely event that a franchisee is not aware of the applicable general terms and conditions (if declared applicable) of the contractual counterparty and is thus faced with a “surprise” if he unexpectedly fails to pay his invoices.

Such a negative “surprise” can also often lead to a hardening of relations between franchisor and franchisee. There is often a difference in expectations between the parties with regard to the payment policy used, which leads to dissatisfaction and quarrels. This is also the reason why many franchisors do not want to hold their franchisees accountable for their payment behavior and often turn a blind eye to systematic non-payment until it has taken on draconian forms and adjustments are now too late. As the old saying goes, gentle healers make stinking wounds.

It does not have to be the case that pointing out the franchisee’s payment behavior and charging collection costs will necessarily result in a hardening of the relationships. Letting it “slumber” and adopting a passive attitude in the event of non-payment also does not fit into the correct relationship between franchisor and franchisee and the duty of care that the franchisor has towards the franchisee. Of course, charging collection costs is not a pleasant measure for the franchisee, but if clear agreements are made in advance about the payment policy used and it is completely clear to the parties at the time of concluding the franchise agreement what the consequences are of not paying on time. of the invoices, the charging of collection costs will be fully in line with the expectations created and disagreements will largely be absent. It is also important for the franchisor – and this also follows from the duty of care – that he approaches his franchisees in a consistent manner. In other words, that the franchisor creates a certain pattern that the franchisee can rely on.

In addition to creating a certain expectation, agreeing reasonable agreements with regard to payment terms and the amount of the extrajudicial collection costs will also be important for establishing a correct relationship between franchisor and franchisee. After all, a franchise relationship derives its existence from the synergy between franchisor and franchisee, which implies that all agreements between the parties must be reasonable. In addition, treating the franchisee in a reasonable manner also follows from the franchisor’s duty of care. The purpose of agreeing payment agreements and charging extrajudicial collection costs in the event of non-compliance with these agreements should be to create an incentive to comply correctly. However, this incentive must not be so great that it unbalances the synergetic relationships between the parties. After all, this could lead to damage to the franchise organization, which is of course undesirable.

In short, as long as both parties can agree with the agreements made, these agreements are reasonable and it is clear to both parties in advance how these agreements will be complied with, then actual compliance with the agreements need not lead to a hardening of the relations between parties.

Ludwig & Van Dam franchise attorneys, franchise legal advice