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
Bankrupt because the franchisor refused to sell the franchise company – dated January 28, 2020 – mr. AW Dolphin
The District Court of The Hague has dealt with a request from a franchisor to declare a franchisee bankrupt.
Prescribed shop fitting – dated January 28, 2020 – mr. AW Dolphin
The Midden-Nederland District Court has ruled on whether a franchisee is obliged to carry the shop fittings prescribed by the franchisor.
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.