Termination of a Franchise Agreement

Termination of a Franchise Agreement

Franchise agreements are usually concluded for a specific period of time. Some franchise agreements stipulate that the franchise agreement is tacitly renewed or extended for a specified period. The use of the cancellation option (of a renewed or extended franchise agreement) can be a source of a dispute. On 15 December 2014, the preliminary relief judge of the District Court of East Brabant ( ECLI:NL:RBOBR:2014:8133 ) ruled in a dispute about the termination of a franchise agreement. In the preliminary opinion, the franchise agreement had been terminated in accordance with the franchise agreement and there was no reason to award an advance on compensation.

The franchise agreement stipulated that the franchise agreement could be terminated at the end of each calendar year with due observance of a notice period of three months. The franchisor had terminated the franchise agreement by letter of July 10, 2014 by December 31, 2014. According to the preliminary ruling, the franchise agreement had been terminated in accordance with the franchise agreement.

The judge also ruled that there was no reason to award damages. Further investigation is required into the question of whether the franchisor could not reasonably have made use of the option of termination or whether it should have used a longer notice period as a result of which the franchisor would be liable for damages. According to the preliminary relief judge, summary proceedings are not suitable for this.

The franchisee had summoned four legal entities of which the franchisee stated that they were all part of the same (distribution) chain. However, the franchise agreement was concluded with only one of these four legal entities. The preliminary relief judge did not follow the franchisee’s argument to assume identification or breakthrough of liability for the other three defendants. The mere fact that the four parties have offices at the same address or have the same (indirect) directors is insufficient.

This judgment once again shows that summary proceedings often follow the strict text of the franchise agreement.

Mr AW Dolphijn – Franchise lawyer

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