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
When does a franchisor go too far when recruiting franchisees?
The judgment of the Court of Appeal of Arnhem-Leeuwarden on 5 February 2019 dealt with whether the franchisor had acted impermissibly when recruiting the franchisees.
Advisory Board on Regulatory Pressure (ATR) advises State Secretary Keijzer about the Franchise Act
In short, it is first advised to actively inform franchisors and franchisees about this amendment to the law.
Post non-competition ban on services and sales franchise
When a franchise agreement ends, many franchisees encounter a prohibition in the franchise agreement to perform similar work for a period of time thereafter
The concept of the Franchise Act: impact for franchisors and franchisees – dated February 5, 2019 – mr. AW Dolphin
Ludwig & Van Dam Advocaten believes that if the draft of the Franchise Act actually becomes law, a lot will change for franchisors and franchisees.
Buy franchise business and the laid off sick employee from 7 years ago
The question is whether a Bruna franchisee, when selling the franchise company to Bruna, should have stated that seven years ago an employee had left employment sick.
Court prohibits Domino’s unilateral area reduction when extending franchise agreements – dated January 28, 2019 – mr. RCWL Albers
On January 9, 2019, the District Court of Rotterdam rendered a judgment in a lawsuit initiated by the Association of Domino's Pizza Franchisees and all its members (almost all Domino's franchisees).