The franchise formula as the destination of the rented property

The Amsterdam Court of Appeal recently ruled on the question of whether a rental agreement can be dissolved and the rented property should be vacated, because the renting franchisee acted contrary to the destination clause in the rental agreement. That clause prescribed use of the leased property according to the franchise formula. See: http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHAMS:2013:4913&keyword=franchise

The tenant, who is also the franchisee, defended himself against the claims, arguing, among other things, that the formula in practice deviated strongly from what had been agreed in writing at the time.

The Court of Appeal has established that a franchise formula is usually subject to development, and that this is all the more true in this case since the lessee is the formula’s first and only franchisee. The franchise agreement also stipulates that the franchisee is obliged to cooperate in the further development of the formula. The Court of Appeal ruled that it can be argued against the franchisee that he violated the destination clause in the rental agreement because he did not meet the essential characteristics of the formula.

It follows from this ruling that franchisees should be vigilant when interpreting the franchise formula, especially if the formula is relatively new and under development. Franchisors would do well to include a clause in the rental agreement that the tenant is obliged to use the formula, as well as that the tenant is obliged to cooperate in the further development of the formula.

Mr AW Dolphin  – Franchise attorney

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