J. van Koetsveld – Franchise lawyer
Most franchise agreements stipulate that after termination of the franchise agreement, the former franchisee must comply with a non-competition clause. A non-competition clause normally applies for a period of one year after termination of the agreement and at least for the franchisee’s location or former exclusive area. During that period, the former franchisee is usually not allowed to operate a competing business like the one it operated under the franchise agreement at the location or territory. The former franchisee is free to operate a non-competitive business in the location or in the district or to operate a competitive business outside it. There is also the possibility that the former franchisee transfers his company to a third party, who is not bound by the non-competition clause.
In the situations referred to above, it is also important who is allowed to use the telephone and fax numbers, hereinafter referred to as: “numbers”, that were previously used by the franchisee after termination of the franchise agreement. The use of the numbers is particularly important for companies that receive their orders largely or partly by telephone or fax. Examples include financial service providers, mobile service companies and delivery services.
At the end of the franchise agreement, three situations can be distinguished with regard to the numbers. The first concerns the situation in which the franchise agreement does not stipulate anything about the use of the numbers after the agreement has expired, the second concerns the situation in which the franchise agreement stipulates that the numbers must be used by the former franchisee. transferred to the franchisor and finally the situation in which the numbers are already owned and registered in the name of the franchisor from the start of the franchise agreement.
If it is expressly stipulated that the numbers must be transferred to the franchisor, this can in most cases be enforced by the franchisor. In the event that the numbers are already owned by the franchisor, in fact nothing needs to be done and the franchisor remains the owner. The situation in which nothing is stipulated in the franchise agreement does not necessarily mean that the former franchisee can continue to use the numbers in all cases.
In a recent judgment, the Interim Relief Judge in Assen expressed its opinion on the latter situation. The matter that was discussed in Assen concerned a franchise agreement with regard to a mortgage advice organisation. There was no provision in the franchise agreement regarding the use of the numbers after the termination of the agreement. The franchise agreement had meanwhile been terminated. The numbers in question were not used by the former franchisee itself, but were transferred to a third party. The third used these numbers for her company, which also provided mortgage advice under a different name. At the time that the Court in preliminary relief proceedings was requested to rule, the relevant telephone and fax numbers were still listed in the Yellow Pages under the name of the franchise organisation. In preliminary relief proceedings, the franchisor is requesting that the numbers in question be forwarded to it so that the franchisee, or the third party to whom the numbers have been transferred, can no longer use them.
The Preliminary Relief Judge has ruled as follows in this regard:
“On the one hand, Jonghart BV (the transferee of the numbers) is therefore entitled to use these numbers. On the other hand, it is plausible that the current situation is leading to confusion among the public and that the plaintiff (the franchisor) suffers damage as a result. This is all the more pressing now that the defendants are also involved in financial services. This risk of confusion remains as long as the relevant numbers are listed in the name of HYPOTHEEK VISIE, in the Yellow Pages and the Telefoongids. It is therefore reasonable to allow the plaintiff’s claim in that respect to avoid this confusion among the public.” The Preliminary Relief Judge decides that the numbers in question will not be forwarded, but that the “caller” must have the option of being connected to the former franchisor or the transferee by means of a telephone answering machine. It is remarkable that this also applies to the fax numbers.
Based on the foregoing, franchisees should take into account that even if the franchise agreement does not provide for the use of the telephone and fax numbers after termination of the agreement, the use of these numbers is not in all cases fully accrues to the former franchisee.
Ludwig & Van Dam franchise attorneys, franchise legal advice