The boundaries of the franchise agreement

The subdistrict court in Bergen op Zoom recently ordered a franchisee in urgent preliminary relief proceedings to vacate the retail business space he rented and, in line with the non-competition clause included in the franchise agreement, to discontinue his business activities in the exclusive area as included in the franchise agreement, all this under penalty of a penalty. A far-reaching judgement, with major consequences for the franchisee involved. The question then naturally arises as to how this could have come about.

The root cause of these issues lay in the divorce of the two marriage partners, who were also partners in the general partnership which was the formal franchisee. At some point, the man decided to chart his own course with his new partner in the franchised company, which he did not care much about.  to the franchise agreement and the provisions therein. The general partnership was unilaterally dissolved, payment arrears arose, and finally, after the store had been closed for a few days, strange purchases were made. Finally, the franchisor was informed that the franchisee considered the franchise agreement invalid and that he would continue under his own name. Attempts were also made to induce the main lessor to enter into a direct lease relationship with the franchisee, overriding the sublease agreement.

In the end, the franchisor was forced to demand eviction and industrial strike in preliminary relief proceedings, among other things to prevent (serious) reputational damage to its concept. As follows from the beginning of this contribution, the subdistrict court judge found the behavior of the franchisee considerably too much and the franchisor’s claims have all been awarded in this case. It is true that the franchisee put up a defence, but the subdistrict court judge was of the opinion that this could not help him and that he was mainly to blame for the situation that had arisen.

With some regularity, examples are cited in these contributions of franchisees who manage to obtain legal compensation from their franchisor or favorable termination conditions of the franchise agreement. In most cases, there is every reason to do so in this case. However, the present example shows that a franchise agreement and the provisions contained therein should indeed be taken seriously. Furthermore, the present case shows that, where appropriate, the court has no difficulty whatsoever in also dissolving a sublease agreement that is linked to the term of the franchise agreement, together with that franchise agreement. As a franchisee, one should simply not go too crazy, that can lead to serious consequences. As a franchisee, one should be well prepared to go to war against the franchisor and not to think too lightly about, for example, exclusive purchase clauses, non-competition clauses and linked rental agreements. Frivolous behavior can lead to serious and irreversible consequences, including in the Dutch courts.

Ludwig & Van Dam franchise attorneys, franchise legal advice