No compensation of goodwill in franchise agreements? – January 28, 2016 – mr. AW Dolphin

On January 20, 2016, the Interim Relief Judge of the District Court of Amsterdam ruled, ECLI:NL:RBMNE:2016:353 (Ipic/franchisee Lelystad) that “compensation of goodwill is not normally an issue in franchise agreements”. The franchisor had entered into a franchise and rental agreement with a franchisee. On the basis of the provisions of Article 7:291 paragraph 2 of the Dutch Civil Code, the subdistrict court had approved the clause in the rental and franchise agreement, in the sense that, in short, upon termination of the franchise agreement, the rental agreement also ends, without a court order. intervention. Accordingly, the franchisor had terminated the franchise and lease agreement. The stipulation that deviates from the law, approved by the subdistrict court, also implies a contractually fixed remuneration to the franchisee.

The franchisee takes legal action against the termination, arguing, among other things, that the contractual termination compensation offered is too low and the franchisee is entitled to a higher goodwill compensation.

The preliminary relief judge considered that compensation of goodwill is not normally an issue in franchising agreements. This is one of the reasons why the franchisee’s argument is ignored. This consideration deserves attention. Not only because, pursuant to Section 7:308 of the Dutch Civil Code, a lessee may, under certain circumstances, claim a goodwill compensation in the event of termination by the lessor, but even more so now that the franchise agreement itself also grants compensation in the event of termination by the franchisor of the franchising property. and rental agreement. The latter occurs more often and is certainly no exception.

Incidentally, the judgment HR 12 July 2002, NJ 2002, 457 was not discussed, from which it follows that the compensation pursuant to Article 7:308 of the Dutch Civil Code cannot yet be claimed (in counterclaim) in the termination proceedings initiated by the lessor, because a claim to compensation can only arise if the business space is actually used for conducting a similar business.

It is true, however, that the compensation pursuant to Article 7:308 of the Dutch Civil Code in rental and franchise agreements is sometimes less high or difficult to allocate, precisely because it is obvious that any advantage of the lessor/franchisor in the exercise of a comparable continued business must be attributed to the franchise formula and not to the entrepreneurial activities of the former tenant/franchisee. It is of course highly dependent on the circumstances, but a goodwill compensation at the end of a franchise agreement does not seem impossible to me. Not even if this has not been agreed.

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