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
Franchisor fails by invoking a non-compete clause
Although a non-compete clause is validly formulated in a franchise agreement, a situation may arise that is so diffuse that the franchisor cannot invoke it.
Acquisitions and Franchise Interest
It will not have escaped anyone's attention, certainly in the last year it can only be concluded that the Dutch economy is once again on the rise.
Which court for a rental and franchise agreement?
Which court is competent to rule on a related rental and franchise agreement?
Interview Franchise+ – mrs. J. Sterk and AW Dolphijn – “Reversal burden of proof in forecasts honored by court”
The new Acquisition Fraud Act indeed appears to be relevant for the franchise industry, according to this article from Franchise+.
Franchisor convicted under the Acquisition Fraud Act
For the first time, a court has ruled, with reference to the Acquisition Fraud Act, that if a franchisee claims that the franchisor has presented an unsatisfactory prognosis
Agreements Related to the Franchise Agreement
On 31 October 2017, the Arnhem-Leeuwarden Court of Appeal issued similar judgments for nineteen franchisees (ECLI:NL:GHARL:2017:9453 through ECLI:NL:GHARL:2017:9472).