Franchisee protection in case of subletting

Court of Rotterdam, subdistrict sector 

The subdistrict court recently ruled in connection with a deviation from mandatory tenancy law, which means that the lease must be terminated when the franchise agreement is terminated. 

The subdistrict court considers that the independent tenant interest of the franchisee in this situation (car washes) is comparable to operating agreements of petrol stations, in which the independent tenant interest is also relevant. The purpose of the construction submitted to the subdistrict court is to guarantee that the lease ends when the franchise agreement ends. However, the subdistrict court rejected the request, considering the following: 

–  there are too many and too broad termination options between franchisee and franchisor;

–  the statutory cancellation and termination options for the franchisee are unnecessarily set aside;

–  by relinquishing its security of tenure without further compensation from the franchisor, the franchisee loses goodwill;

–  the consequences of any approval of the deviating stipulations are difficult to foresee, partly in connection with ongoing obligations. On this basis, it is not considered desirable to exclude the possibility of judicial review in advance. 

The subdistrict court also considers that the franchisee is a small self-employed person and wholly dependent on the activities in the franchise establishment in question. In the view of the subdistrict court, the fact that the franchisor is part of an internationally operating franchise organization does not mean that the franchisee should be denied (partial) rent protection. 

The ruling shows that during assessments the interests of franchisees are carefully weighed up by subdistrict court judges and that linking them to deviating rental clauses is not necessarily the right course of action. Franchisee and franchisor are advised to weigh their rights and interests carefully and, if necessary, to deviate from mandatory tenancy law on the basis of consensus. In addition, the tenant’s interest of the franchisee may not extend beyond what is necessary in the context of preserving the location for the franchise organization. Compensation schemes, for example in the form of take-back schemes, are certainly important in that context. Franchisee and franchisor are therefore wise to anticipate this by also including any compensation arrangements in their agreements in advance.

Mr Th.R. Ludwig  – Franchise attorney

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