Obligation to sell back at the end of the franchise agreement

Franchise agreements sometimes provide that the franchisee is required to sell back purchased assets at the end of the franchise agreement. What if the franchisee sold the assets to another before the end of the franchise agreement? The preliminary relief judge of the District Court of Central Netherlands ruled on this question on 29 December 2017, ECLI:NL:RBMNE:2017:6793. 

Pursuant to the franchise agreement, the franchisee is obliged to purchase certain equipment for the operation of the franchise formula. The franchise agreement stipulates that the franchisee must sell the purchased equipment back to the franchisor.

The franchise agreement is terminated by mutual consent and the franchisor applies for summary judgment to order the franchisee to resell the equipment.

The franchisee, on the other hand, argues that it sold the equipment to a third party (in good faith) which would prevent it from meeting the sell-back obligation. In that case, the former franchisee could perhaps only be ordered to pay replacement compensation in proceedings on the merits. 

However, the preliminary relief judge does not believe that the former franchisee actually sold the equipment to a third party. The preliminary relief judge considers that the story of the former franchisee is implausible, partly because the sale allegedly took place to the brother of the former franchisee, the former franchisee continued to use the equipment and that the equipment was only very recently moved to the new location of the former franchisee. 

The conclusion is that the former franchisee is ordered to make the equipment available to the franchisor. 

mr. AW Dolphin  – franchise lawyer 

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

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