Guarantee schemes for franchisees

Franchise agreements often stipulate that franchisees mutually guarantee guarantees for various products. If the customer buys a radio in a branch in Horn, he can take it to a fellow franchisee in Roermond with a defect. Such a regulation is understandable from the service point of view towards the consumer. After all, the strength of the chain lies in the uniformity and the confidence that consumers may have in the chain. This means that the customer must be able to go to the same (problem) anywhere and at any time.

The question is, however, whether such a scheme is always desirable and workable. In practice, the well-intentioned regulation produces the necessary complications and red tape. Mutual settlements between franchisees, settlements via the franchisor, administrative burden, etc.; they are all problems to contend with. The new law on consumer purchase concretizes and significantly expands the possibilities for consumers with regard to guarantee schemes. This may mean that franchisees will only be confronted with a defect in a product purchased at another franchise location after a considerable period of time. Various franchise organizations are currently considering a reduction in the mutual guarantee scheme, meaning that the consumer can only go to the store where the product was purchased. The underlying idea arises from the disadvantages outlined above.

The nature of the products of the franchise organization is important in this respect. After all, the desirability, feasibility and application of the mutual guarantee scheme differs strongly per product. With clothing, an absolutely honorable guarantee, meaning that the product can be returned without further ado, with the payment being returned, is a completely different situation than with white and brown goods. In practice, there are usually central reporting centers for defects in a DVD player, for example, where the defect is assessed and rectified. In both situations a different administrative and logistical settlement arises. This entails that it is certainly not the case that in general the emerging trend towards austerity of mutual guarantee schemes is simply desirable. On the contrary, the strength of the chain towards the consumer remains that the customer must be able to go anywhere with his problem. The fact that the law on consumer purchase clarifies and expands the guarantee schemes on parts does not change this in itself. The new law is therefore not in itself an argument for changing the policy in the franchise organization in question.

Ludwig & Van Dam franchise attorneys, franchise legal advice