Judge anticipates Franchise Act: no mandatory formula change (without threshold value)

In its judgment of 30 September 2020, ECLI:NL:RBAMS:2020:4799, the Amsterdam District Court ruled that a Blokker franchisee is not obliged to renovate the store in accordance with the latest formula principles, as instructed by Blokker. Blokker has developed a new house style “Alles in Huis” and states that the franchisee is obliged to make the associated adjustments and investments. In view of this refusal by the franchisee, Blokker should not have terminated the franchise agreement. In doing so, the court expressly refers to the Franchise Act, which is not yet in force. Blokker is ordered to pay an advance on the damage suffered by the franchisee.

The court ruled that the question of whether the franchisee is obliged to carry out the renovation depends on the agreements made in this regard when the franchise agreement was concluded. There is nothing concrete about this in the franchise agreement itself. The provisions in the franchise agreement, which Blokker has invoked (which, in short, amount to the fact that the franchisee must follow Blokker’s instructions and keep his store up to date), are not specific enough to be able to impose an expensive renovation on the franchisee .

Prior to concluding the franchise agreement, the parties discussed Blokker’s wish that the store should be renovated. It is not clear how exactly this conversation took place. Although it can be deduced from the e-mails about this, which were drawn up at the instigation of the franchisee, that Blokker only agreed to postpone the renovation and not to cancel it, it does not contain anything concrete about, for example, the costs and the scope of the renovation. It is up to Blokker as the franchisor to ensure that an obligation such as this is laid down unequivocally in the franchise agreement, or in some other way, especially since it concerns an obligation with far-reaching financial consequences, while Blokker knew that the financial the franchisee’s options were limited. Blokker has failed to do so. It is therefore sufficiently plausible that the court on the merits will rule that Blokker’s termination of the franchise agreement took place irregularly and that it is liable for damages on that ground.

This preliminary judgment is supported by the (new) Franchise Act. Although the Franchise Act is not yet in force, it is possible to deduce from it (and from the discussion of that act in parliament) the general rule – which is already in force – that a franchisor must treat the franchisee as a good franchisor. behaved and vice versa. After all, franchisor and franchisee now also have a (contractual) relationship that is partly governed by reasonableness and fairness. The Franchise Act provides further details of that reasonableness and fairness. Support can also be found in the Franchise Act for the principle that the franchisor, when entering into the franchise agreement, provides the franchisee with timely information about his financial position, insofar as this is reasonably relevant to the conclusion of that agreement. The legislator has laid down in the explanatory memorandum that the franchise relationship is intrinsically unequal and that this can lead to unreasonable and undesirable situations for the franchisee.

This ruling illustrates the importance of Article 7:921 of the Dutch Civil Code of the Franchise Act. This article of the Franchise Act prescribes that changes that the franchisor wishes to implement are possible in certain cases. Being able to further develop the formula is often very important for franchisors. The formulation of the unilateral amendment clause in the franchise agreement is therefore of great importance.

mr. AW Dolphijn – franchise lawyer

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