Franchisor is obliged to extend the franchise agreement

On September 6, 2017, the Rotterdam District Court ruled, ECLI:NL:RBROT:2017:6975 (Misty / Bram Ladage), that a franchisor’s refusal to extend a franchise agreement was invalid. The franchisor wanted to get rid of the franchisee, partly because the franchisee wanted to accept the new franchise agreement model submitted.

On 31 March 2017, the District Court of Rotterdam, ECLI:NL:RBROT:2017:2457, ruled against the same franchisor in preliminary relief proceedings that it should not have terminated the franchise agreement with another franchisee at the end of the term because the franchisee has a new model of its franchise agreement. Read more: http://bit.ly/2unR1Nf. 

In the present case, the franchisor had terminated the franchise agreement at the end of its term. Under the franchise agreement, the franchise agreement would continue to be renewed unless the franchisor had terminated it because “it cannot reasonably be required to continue the agreement.” 

The court rules that  on the basis of the content of the contract and what the parties have argued about its formation, the conclusion cannot be any other than that the franchisor’s power to terminate is subject to a restrictive condition, in the sense that the franchisor must exercise its future options for termination. when entering into the agreement in favor of (the legal predecessor of) the franchisee. This condition is not such that termination of the franchise agreement by the franchisor has actually become impossible. It is, however, the responsibility of the franchisor to put forward facts and circumstances from which it appears that the franchisor cannot reasonably be expected to allow the agreement to continue. 

The franchisor argues that it has a strong interest in using a standardized franchise agreement model for all its franchisees, but that the franchisee in question is unduly rigid in that discussion. According to the franchisor, this would also apply to the need to adjust the district protection. According to the court, it has not been sufficiently proven that Misty’s attitude has made fruitful cooperation between the parties impossible in the future. To that extent, there is therefore no valid ground for termination of the franchise agreement by Bram Ladage. 

The conclusion of the foregoing is that the grounds put forward by the franchisor for terminating the franchise agreement, considered both individually and in conjunction with each other, are insufficient to conclude that the franchisor cannot reasonably be expected to continue the agreement. 

The franchisor once again falls flat in her argument that a model franchise agreement could be enforced. The cause of this seems to lie mainly in the limitation of the grounds for terminating the franchise agreement. If the existing franchise agreements had been drafted differently, the outcome of the proceedings might have been different. 

mr. AW Dolphijn – franchise lawyer 

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