Relocation of franchisees

For a variety of reasons, it may be necessary for a franchisee to move their business to a different location during the term of their franchise agreement. This can be caused by problems concerning the rental relationship with the (main) lessor. This may also be prompted by economic motives, for example a changing, in particular deteriorating, market position of the existing business location. This has already been discussed in an earlier contribution to this section (business locations in motion), with an emphasis on the position of the lessor in this regard.

The question is also sometimes asked whether, when a franchisee moves, the existing franchise relationship in its entirety moves with it, as it were. However, it is lost sight of the fact that a new location, even if it is in the immediate vicinity of the old location, can still entail, and sometimes to a considerable extent, changed market conditions for the franchisee concerned. In practice, something similar can even occur when a franchisee moves within the same shopping centre. For example, the “loop” can turn out slightly different than was the case at the old location. The new location can also be arranged in such a way that an extra member of staff proves necessary to keep the relevant location running responsibly. In other words, a move can have significant consequences for the franchisee involved, both on the benefits and costs side. In the context of the foregoing, it is good franchisor practice, if possible, of course, to carry out a market and location survey of the new location in direct consultation with the franchisee concerned before the decision to move has been made. de facto in the same way as if it were a completely new franchise relationship.

In that case, any uncertainties regarding the new location can be adequately mapped out and both franchisor and franchisee can anticipate the new circumstances in a broad sense. It should be reiterated for the record that a franchisor, when approving the proposed move, bears a considerable responsibility in terms of its success, as the pre-eminently the one who is presumed to have the necessary knowledge and know-how to be able to assess whether the new business location fits within the franchise concept and can enable the franchisee to operate his business in a responsible manner. It is therefore in the interest of both parties involved to conduct a proper market and location survey in these types of situations.

Ludwig & Van Dam franchise attorneys, franchise legal advice