Suspension of payouts allowed by the franchisor

The District Court of Limburg ruled on 30 March 2023, ECLI:NL:RBLIM:2023:2287, that a franchisor could suspend payments to a franchisee.

Under the Franchise Agreement, the Franchisee must arrange for the collection of membership fees from its Members through a supplier designated by the Franchisor. Thus, the membership fees are not collected directly by the franchisee, but through a billing and payment processing service designated by the franchisor.

The franchisee had placed the franchise company in a private limited company. To this end, the franchisor’s consent and cooperation were lacking. Pursuant to the franchise agreement, the franchisee is not permitted to directly or indirectly effect a transfer without the prior written consent of the franchisor. The fact that the franchisor was aware of the BV’s existence, and that the franchisor also addressed the BV in its correspondence, does not mean that the franchisor implicitly cooperated in the disputed transfer. Moreover, the BV was not a party to the franchise agreement and must be regarded as a third party (as referred to in article 6:159 paragraph 1 of the Dutch Civil Code). The franchisee also had a contractual pre-emption right in the case of the intended transfer of the franchise company, which was not fulfilled when the franchise companies were transferred from the sole proprietorship to the BV.

The court rules that there has been a failure to comply with the obligations under the franchise agreement. Therefore, the franchisor could have had the payments to the franchisee suspended (or had them suspended) (third-party clause pursuant to article 6:253 in conjunction with 6:254 paragraph 1 of the Dutch Civil Code).