Franchisee sentenced to pay fine after violation of non-competition clause

The parties have entered into a franchise agreement which relates to assisting divorces. The franchise agreement is terminated by the franchisee. On this occasion, the franchisor draws the franchisee’s attention to compliance with the prohibition of post-contractual non-competition. In summary, the clause prohibits the franchisee from developing similar or related activities in the former exclusive territory after the termination of the franchise agreement. By calling in a so-called mystery guest, the former franchisor shows that the franchisee ignores this clause. Subsequently, the franchisor collects the fines through proceedings on the merits. In doing so, the franchisor omits summary proceedings. The franchisee defends himself by stating that he has not actually performed any work and has not yet made a turnover and therefore there is no question of a violation of the non-competition clause. Moreover, the franchisor would have had to initiate summary proceedings. The court then considers that this defense does not hold water because the non-competition clause is formulated so broadly that the active provision of information and/or acquisitive activities also fall under the prohibition. The franchisor could also suffice with proceedings on the merits, which choice is up to the franchisor in view of the agreements made. The court also considers that value is attached to the fact that the franchisor has also explicitly drawn attention to compliance with the non-competition clause when the franchise relationship is terminated. With regard to the appeal to moderation of the fine imposed for the violation of the prohibition, the court considers that the starting point is that the agreed fine is valid and that the court will only moderate that fine if sufficient concrete facts have been put forward for this purpose. have been brought, from which it follows that equity evidently demands that the fine be moderated. The court considers the mere assertion that the fine is disproportionate to the offense to be insufficient.

It can once again be deduced from the judgment of the court that, as is sometimes suggested, the non-competition clause is not a mere trifle and that fines due in the event of a violation will not automatically be reduced. It can also be deduced from this that checking for violation of such a clause requires an active attitude, starting with clear exit guidance and each violation in itself must be sufficiently proven by the franchisor. A broad formulation of such a clause, prohibiting not only the performance of competitive activities, but also the preliminary phase thereof and acquisitive activities, helps considerably with this burden of proof. Franchisees are advised to understand the scope of the non-competition clause before concluding the franchise agreement. At the end of the franchise relationship, if there is any doubt about the scope of the clause, clarification should still be requested, in order to prevent fines being owed afterwards. Naturally, the above does not alter the fact that, in the event of special circumstances, there can indeed be a question of setting aside work and/or moderation of the non-competition clause. Sufficient concrete facts and circumstances must then be stated for this. If those facts and circumstances exist, it should be considered whether it would not be better for the franchisee to claim suspension and/or ineffectiveness of the clause in advance, whether or not in interim injunction proceedings.

Mr J. Sterk – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to info@ludwigvandam.nl