Consultation: forms and possibilities

Mr Th.R. Ludwig – Franchise attorney 

In practice, consultation between the franchisor and the franchisee often takes place through a franchise council. The franchisees are usually represented in this council, where they, together with the franchisor, regularly discuss a number of matters that are in the interest of the entire franchise organization. This usually concerns matters such as product innovation, marketing, etc. A franchise council usually has advisory powers and no decision-making powers. 

In addition, in practice it often happens that franchisees set up a franchise association among themselves. The franchisees are hereby interconnected in order to represent their interests towards the franchisor. Usually the same or similar topics are discussed here. Usually, however, there is no institutionalized obligation on the part of the franchisor to consult with such an association. The franchisor has usually already set up a franchise council for this purpose. 

How does the franchise council relate to the franchise association? The board of the franchise association often considers it desirable to be represented in the franchise council. Not all franchisors share this view. In practice, such a representation only occurs once in a while. In this case there is a representation of the association, namely (a representation of) the board. This representation is then present in addition to the representative representation of the franchisees, in the form of the various other member-franchisees of the Franchise Council. All in all, a not always practically workable situation. It would be better to integrate both and to anticipate this in the franchise agreement. A practical solution is a mature franchise council, where all those subjects can come forward that can also be raised by the board of a franchise association. A good franchisor is therefore ahead of the problems outlined above.

In practice, the question often arises to what extent advice from a franchise council and/or decisions from the franchise association (of franchisees) are binding for all franchisees. This is only conceivable if this has been explicitly agreed in the franchise agreement. However, this is rarely the case. However, it is conceivable that, when it comes to promotional campaigns, for example, this is indeed taken into account when drawing up the franchise agreement, or that the possibilities of the franchise agreements provide for various guidelines, such as, for example, included in a handbook, which allow such practical operation at this point. If nothing has been arranged in this regard, this does not mean that in this example the franchisee is not obliged to cooperate in promotional campaigns, for example. As a franchisee, he is expected to cooperate at least to some extent in the franchise system made available. Usually such a general provision is also included in the franchise agreement. However, for this and other examples, proper regulations, included in the franchise agreement or in guidelines, whether or not incorporated in the handbook, must guarantee pleasant cooperation. It is of the utmost importance that at least a franchise council or, for example, an advertising committee is consulted on this matter, whereby the franchisor and franchisee must in any case strive for consensus. 

Mr Th.R. Ludwig is a lawyer in Rotterdam. The law firm Ludwig & Van Dam is specialized in franchising. 

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