Franchisee acquires and sells outside its territory, in territories not yet issued to other franchisees. Franchisor objects to this state of affairs and requests them to stop this subject to dissolution of the franchise agreement. The parties will make further agreements on how to deal with the problem. Ultimately, this results in a conflict in which the franchisor dissolves the franchise contract out of court. During a court hearing, both the franchisor and the franchisee argued that the franchisee was allowed to work in territories that had not yet been assigned to anyone. In the end, the franchisor’s argument that the franchisee was not allowed to do this does not hold up either in court or in the highest instance, i.e. the Supreme Court.
NB: Franchisor and franchisee need not even have agreed that the franchisee was allowed to operate in territories that had not yet been allocated, unless otherwise agreed in this context. On competition law grounds, a franchisee is always permitted to do this and in principle a franchisee may not be restricted in this, unless a nuanced arrangement, for example reserving the areas for the franchisor itself, has been agreed between the franchisor and the franchisee.
Mr Th.R. Ludwig – Franchise lawyer Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to firstname.lastname@example.org