The organizational structure of a franchisor
Earlier installments of this section have already discussed the consequences of a bankruptcy of the franchisor for the franchisees. They are of many kinds. Consideration was given to problems that may arise when the supplier of goods and services is a different entity than the contracting party with whom the franchise agreement has been concluded. Such a construction blocks the settlement of a claim from the franchisor’s side on account of, for example, unpaid goods and services against a claim of the franchisee against the franchisor on account of, for example, failed forecasts or other damage. Identification of both legal entities is an exception.
However, this theme touches on a much broader issue that is indirectly also addressed in the European Code of Honor on Franchising, namely the principle that a franchisor “is who he says he is”. In general, it is highly recommended, and good franchisor practice, to ensure that the entity with whom the franchisee enters into the franchise agreement is actually the accountable party for all matters related to the franchise relationship. It follows from the nature of the franchise agreement, and the related duty of care of a franchisor, that a franchisee must be able to address his franchisor at any time without hesitation, without first considering whether the matter he wishes to discuss is now has to do with delivered goods, forecasts, exclusive territory or whatever. Naturally, a franchisor can use contract suppliers. In that case, however, it must be made clear that the supplier concerned is a third party that independently concludes a supply agreement with the franchisees involved.
If work is done in accordance with the above, the franchisee knows at all times exactly who he is dealing with and where he stands. In principle, this also prevents a franchisor from being too tempted to use “empty” BVs, which, should a franchisee claim liability, ultimately offer no recourse. Such a state of affairs does not do justice to the nature of franchising as a form of cooperation. Incidentally, this reasoning also applies vice versa for the franchisee: he too should not hide behind legal personal constructions that stand in the way of both accountability and liability.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Bankrupt because the franchisor refused to sell the franchise company – dated January 28, 2020 – mr. AW Dolphin
The District Court of The Hague has dealt with a request from a franchisor to declare a franchisee bankrupt.
Prescribed shop fitting – dated January 28, 2020 – mr. AW Dolphin
The Midden-Nederland District Court has ruled on whether a franchisee is obliged to carry the shop fittings prescribed by the franchisor.
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.