Master Franchising: Watch Your Saeck
The phenomenon of master franchising is increasingly making its appearance in the Netherlands. In short, this means that a foreign franchise organization develops activities in other countries through master franchisees, who then recruit franchisees themselves in the countries concerned, and thus, as it were, between the franchisees “in the field” and the main organization. Such an instrument, when used properly, offers an excellent opportunity to achieve international expansion. In practice, American organizations sometimes use this instrument.
It is important that such a construction is designed carefully. First, there is the issue of liabilities, particularly in relation to the master franchisee. After all, it has a contractual relationship with the master franchisor, as well as with its own franchisees. Rights and obligations must, of course, be adequately defined. Furthermore, it is generally reasonable to establish a clear boundary, both in legal and in fact terms, between the national franchise portion and the relationship with the master franchisor. An important question in this context is the law of which country the various agreements are concluded. The master franchisor sometimes stipulates that this must be done in accordance with the law of the country of origin, for example American law. On the other hand, the master franchisee, in the Netherlands, for example, will almost always contract with his franchisees under Dutch law. It is important to make an adequate and detailed inventory of the possible consequences of the choice for these two different legal systems. It is also the case that American (master) franchise agreements often have content that is not always in line with, for example, Dutch legal practice. This can, in some cases, lead to situations that no one thinks of so quickly in advance.
The title of this piece is therefore an urgent piece of advice, especially to (potential) master franchisees: make sure that you know exactly where you stand with regard to the aforementioned and various other (legal) questions. Franchisees of a master franchisee are also well advised to ensure in advance that the organization has been built up in a responsible manner.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Judge anticipates Franchise Act: no mandatory formula change (without threshold value)
The District Court of Amsterdam ruled that a Blokker franchisee is not obliged to renovate the store in accordance with the latest formula principles, as instructed by Blokker.
Interview Mr. J. Sterk and mr. C. Rutten in Franchise+: “Call to the automotive sector: prepare yourself well for the new Franchise Act” dated October 2, 2020
The new Franchise Act has a broad effect, also in the automotive sector. But are people aware of it enough?
Article The National Franchise Guide – “Corona discount of 50% on the rent” – mr. AW Dolphijn – dated September 15, 2020
Disappointing turnover due to the corona crisis may mean that the rent is halved, even if the rent is partly turnover-related.
Article Franchise+ – “Franchisor uses “derivative formula” (without his knowledge)” – mr. AW Dolphijn – dated September 9, 2020
Many franchisors will not be aware of the fact that they use a "derived formula" as referred to in the Franchise Act.
Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement?
Article Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement