Extension under “the then applicable conditions”
Many franchise agreements contain a franchise renewal clause that allows the franchisee to re-exercise the franchise for another five years, provided that the franchise agreement is accepted “on the terms then in force”.
Does this somewhat cryptic formulation constitute a license for a franchisor to unilaterally change the conditions, i.e. the content of the new franchise agreement, when the contract extension is up for discussion? By no means. It has been established in case law that a franchisor is certainly not free to freely change the conditions in the new franchise agreement in accordance with its own insight and policy in the event of a contract renewal. For example, if a higher fee is suddenly requested, this means that the option granted can in practice only be invoked under such additional conditions that this is more than the franchisee could expect. The conduct of the franchisor in question described here may then be unlawful.
Does this mean that a franchisor cannot change his franchise agreement at all in the event of a contract renewal if the above option is included in the franchise agreement? Not that either. The franchisor can indeed change and add to various subjects in the franchise agreement. However, it is important to reach consensus in advance with the existing franchisees, for example in consultation with the franchise council. In this way, surprises in the event of a contract extension for existing franchisees are eliminated in advance and a clear situation is created long before any contract extension that benefits everyone.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Ludwig & Van Dam attorneys partner of the National Franchise Congress
On November 14, 2024, we will take you along in ...
Impact of Franchise Act on franchise statistics minimal
By Maaike Munnik and Remy Albers Ludwig & Van ...
Seminar at the National Franchise Fair October 11 & 12, 2024
On October 11, 2024 at 11:00 a.m., the seminar “What ...
Publication by Mr. Klaas op de Hoek in Franchise & Law Magazine
In the magazine Franchise & Recht, Mr. Klaas op de ...
What are my rights as a franchisee?
Before the Seminar: The Franchise Statistics that Ludwig & Van ...
The franchise statistics: save the date!
For many years, Ludwig & Van Dam franchise lawyers ...