The supermarket entrepreneur himself determines the choice formula after acquiring ownership of the property

Leeuwarden Court of Appeal

In the displacement market of supermarkets, those who have access to their own retail premises often determine which formula may be used. A recent judgment of the Court of Appeal of Leeuwarden confirms this. The case is as follows.

The supermarket entrepreneur has concluded a sublease agreement and a franchise agreement with the supermarket organisation. Afterwards, the supermarket entrepreneur acquires ownership of the building. As a result, the supermarket entrepreneur also becomes a (main) lessor in addition to being a subtenant and thus rents to the supermarket organization, which in turn (sub)leases to the supermarket entrepreneur. Incidentally, this in this case by companies affiliated to the supermarket entrepreneur.

The supermarket entrepreneur has now concluded that the formula used, which has also been made mandatory in the sublease agreement and is linked to the franchise agreement, no longer suits him in the (changed) local market situation. For reasons of business economics, the supermarket entrepreneur wishes to apply a different formula. The supermarket entrepreneur therefore wishes to simultaneously terminate the franchise agreement and the main rental agreement and to enter into a partnership with another formula. The consent of the court is required for the termination of the latter agreement. Without termination of the main lease agreement, termination of the franchise agreement has little effect, given the link between the two agreements and formula destination in the sublease agreement. On appeal, the Court of Appeal assesses the eviction thus requested on the basis of a (subsidiary) general weighing of interests, thus ignoring the (primary) appeal to urgent personal use for procedural reasons. Particularly worth mentioning here is the Court of Appeal’s opinion, in the context of this weighing of interests, that the entrepreneurial interest, partly due to increasing competition from its own franchisor, benefits from the possibility of a free choice of the supermarket formula to be used. According to the Court of Appeal, it must be possible to use the property that has meanwhile been acquired. The Court of Appeal also considers it important that the supermarket organization itself has failed to strengthen its position by, for example, acquiring the building itself. Furthermore, the franchise agreement has lasted for more than 15 years and the supermarket organization has hardly invested, if at all, in the relevant business space. The Court of Appeal thus concludes that the weighing of interests is in favor of the supermarket entrepreneur and entails that the main lease may be terminated, so that it no longer constitutes an obstacle to the choice of its own formula.

In view of the musical chairs that are still currently taking place in supermarket land, whereby the entrepreneur can hardly determine which formula is the best on the basis of the ownership and (main) tenancy rights of a relevant business space, it is worthwhile taking the opportunity to take ownership of the business premises. acquisition should be given serious consideration. Of course, there may also be other obstacles to whether or not to apply a different formula, such as a non-competition clause, so that the possibilities must be examined in more detail on a case-by-case basis.

Mr. J. Strong  – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to info@ludwigvandam.nl