Franchising as urgent personal use

In a judgment of 18 November 2014, the Court of Appeal in Den Bosch (ECLI:NL:GHSHE:2014:4741) considered, among other things, whether a lessor may terminate the lease of a business space for urgent personal use, because its subsidiary has entered into an agreement with a franchise organization for the exploitation of the business space under the franchise formula of this franchise organization.

It concerned a catering area at a train station of the Dutch Railways. The Dutch Railways (via Retailbedrijf, formerly Servex) leases catering spaces at various train stations and has apparently concluded an agreement with Starbucks on the basis of which Starbucks can have its franchisees operate the catering spaces.

The Court of Appeal considers that the lessor has made it sufficiently plausible that it has a great interest in operating the shops and catering facilities at the train station by means of franchise formulas, among other things, to operate the shops and catering facilities at the stations, including the leased commercial space in issue into your own hands. In this context, the court explicitly considers that use of the leased property by a franchisee affiliated with the lessor can also be understood as personal use.

The lessor has also made it plausible that this concerns personal own use. The concept of ‘own use’ also includes giving the use to someone else, for example to a company in which the lessor is involved, if this serves one’s own interest. In the opinion of the court, such a situation arises here. The lessor has made it sufficiently plausible that it serves its own interests by letting the leased property to Retailbedrijf, both with regard to its control (via Retailbedrijf) and with regard to the financial return, which will consist of  rent to be paid to the landlord and from the operating income, which will contribute indirectly to the profit of the landlord.

The court sees the fact that full control is one of the valid reasons for the termination. In addition, it is up to the landlord how she wants to conduct her business. In that context, the fact that it only wishes to enter into lease agreements with its subsidiary Retailbedrijf, which in turn concludes franchise agreements for various locations, is one of the choices that the landlord as an entrepreneur can make. The landlord has also made it sufficiently plausible that a franchise agreement has been concluded with Starbucks. It has not been shown that there is arbitrariness as claimed by the tenant.

It can be deduced from this ruling that the desire to allow a franchise organization to use a business space (through a subsidiary) for the exploitation of the business space by a franchisee may be a reason to assume that there is a basis for the termination due to urgent personal use. Earlier, in a completely different case, the Enschede Subdistrict Court ruled on 21 February 2012, ECLI:NL:RBALM:2012:BV6776, that use by a party other than the renting party, such as a franchisee in that case, can also be regarded as personal use. apply (as referred to in Article 7: 296 paragraph 1 sub b of the Dutch Civil Code), if the interest of the lessor is served by giving the leased property to someone else for use.

The foregoing will certainly not apply in all cases. The outcome may be different, for example, if the tenant has agreed with the landlord that the rented property will be expanded and the landlord is obliged to allow the tenant access to the new building on that basis. Investments by the tenant on behalf of or at the insistence of the landlord can also stand in the way of termination for urgent reasons. In short, it remains extremely casuistic. It is very important for tenants to keep an eye on the risks of termination due to urgent personal use.

Mr AW Dolphin  – Franchise attorney

Ludwig & Van Dam Franchise attorneys, franchise legal advice.  Do you want to respond? Mail to dolphijn@ludwigvandam.nl