District protection no protection against termination due to urgent own use – dated September 17, 2019 – mr. AW Dolphin

On 10 September 2019, the Court of Appeal of The Hague, ECLI:NL:GHDHA:2019:2341, made a decision in the matter between Bram Ladage as franchisor and one of its franchisees. The question to the  was in order, is whether the franchisor as lessor can execute the lease  terminate due to urgent own use, while this own use, in the sentence  of district protection, would be excluded under the franchise agreement. 

The franchisor had terminated that lease due to urgent personal use, among other things because it wished to operate the business space itself again as a snack bar and that it would receive a profit from that exploitation.  can achieve a better return than renting to the franchisee. The franchisor had drawn up an operating budget for this purpose. The court considers that, insofar as the franchisee would be entitled to a goodwill compensation (within the meaning of Article 7:308 of the Dutch Civil Code) at the end of the exploitation, the difference between the net profit of its own exploitation  by the franchisor on the one hand and the rental income for the franchisor on the other, is so great that it is still plausible that a higher return can be achieved by the franchisor with its own operation.

The franchisee pointed out that in the franchise agreement was agreed that the franchisee has the exclusive entitled to use the Bram Ladage system in the business premises. According to the franchisee, this means that the franchisor as lessor has the cannot cancel the rent due to urgent own use, because this is exactly what own use with the territory protection in the franchise agreement is excluded. The  after all, the franchise agreement will continue until 1 January 2023. Judged  however, it is ruled by the court that the duration of the franchise agreement is not  is relevant, as the franchise agreement does not entitle the continuation of  the lease of the business space.

In this case, the term of a franchise agreement therefore offers no guarantee for the premature termination of the rental agreement by the franchisor on the grounds of urgent personal use, even if district exclusivity has been agreed in the franchise agreement.

mr. AW Dolphijn – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice.

Do you want to respond? Go to dolphijn@ludwigvandam.nl