Corona justifies halving the franchise fee – mr. RCWL Albers – dated February 1, 2022

In a recent ruling by the Amsterdam Court of Appeal, the court reversed a cessation of the franchisee’s exploitation ordered by a court in preliminary relief proceedings.

The court considered it justified by an appeal to unforeseen circumstances that the franchisee had paid less franchise fee during lockdowns. A legal basis that has been frequently used in recent years by tenants to (successfully) negotiate rent discounts.

Although an appeal to unforeseen circumstances (Section 6:258 of the Dutch Civil Code) is not exclusively reserved for parties to a lease, litigation has mainly taken place in the context of lease agreements in recent years.

In line with this jurisprudence, the court considers in this ruling on the franchise agreement that:

“The possibility of the outbreak of a crisis of this magnitude was not foreseen or (apparently) intended by the parties in the franchise agreement. It is incorrect to allow the consequences of this to be unilaterally for the account and risk of Amstel (the franchisee), a division of that risk (on a 50/50 basis) for the months in which the Julianaplein location had to be closed in whole or in part due to corona measures imposed by the government is more obvious.”[1]

This reasoning of the court is understandable in itself, but it is not clear from the ruling how this relates to the fact that the franchise fee depends on turnover. In this case, the franchise fee was 4% of turnover. A logical consequence of (partial) lockdowns is of course that turnover is falling and that already for this reason less franchise fee is paid. Unlike with (most) rental agreements, there is no monthly fixed contribution in this case.

In my view, this aspect has wrongly not been included in the considerations of the Court of Appeal and in doing so, the Court of Appeal seems (perhaps unintentionally) to introduce a rule of law that makes it possible for franchisees (in the sectors affected by corona) to set their turnover-dependent franchise fee for the leave half unpaid or even claim it back.

[1] See ECLI:NL:GHAMS:2021:16, paragraph 3.10.