More haste less speed
When entering into a franchise agreement, other agreements are often discussed. The law obliges the franchisor to provide all relevant information at least four weeks before concluding the franchise agreement. This is called the “stand-still arrangement”. This may include contracts to be concluded with third parties, such as a contractor in connection with the layout of the store. In practice, compliance with this is not always easy. Orders also fall under the stand-still arrangement
Orders placed by the franchisee via the franchisor fall under the stand-still arrangement. It becomes more complicated if an external party, such as a contractor, carries out work. In that case, a separate construction contract must be concluded. However, the contractor can claim that he has nothing to do with the franchise agreement and does not have to adhere to the stand-still period. Be careful with payments or investments
During the four weeks prior to the conclusion of the franchise agreement, the franchisor may not encourage payments or investments related to the agreement. It is not uncommon for the delivery of materials, such as inventory, to be delayed. It may then be wise to place orders in good time to limit the risk of delayed delivery as much as possible. This also applies to situations in which the franchisor proposes to place orders in advance with, for example, a contractor to perform services. Although it may seem wise to place orders in good time, the standstill period is actually intended as a cooling-off period. If the franchisor encourages the franchisee to place orders before the expiry of this period, he is probably acting in breach of the law. This may result in the franchisee being able to terminate the franchise agreement under certain circumstances. Careful compliance with the standstill
The standstill arrangement therefore plays a crucial role in entering into franchise agreements. It should give the franchisee the space to think carefully, without financial pressure. Attempts to circumvent the standstill period, such as placing “advance” orders, can have legal consequences and invalidate the franchise agreement. Carefulness and compliance with the rules are essential to avoid problems.
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl
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