Well begun is half done: adequate link between franchise and sublease agreement

If you – in your capacity as franchisor – wish to expand your franchise formula, a number of matters must be properly arranged in advance. Of course you must have a franchise agreement that complies with national and European law regulations. Another subject that, in my opinion, should be adequately arranged before entering into a new franchise agreement is the relationship between franchisor/landlord and franchisee/tenant. I would now like to elaborate on this last subject.

In both the franchise agreement and the rental agreement, a provision is usually included stating that if the franchise agreement ends, this automatically leads to the end of the rental agreement (hereinafter I refer to this provision as a “linking provision”). However, such a binding provision is contrary to the mandatory provisions of tenancy law. The law stipulates that the term of a lease agreement relating to the lease of industrial space must be for 5 years (with an option to extend for another 5 years). In that case, the lessee (or the franchisee) has the option of annulling the binding provision. This is a rather rigorous sanction. This is because annulment has retroactive effect, which means that the linking provision is deemed never to have existed.

However, such destruction can be prevented if the subdistrict court judge approves the linking provision. The franchisor/landlord can therefore request the subdistrict court judge to approve the – in principle – prohibited linking provision before entering into the lease and franchise agreement. It is even possible that both the franchisor and the franchisee jointly apply to the subdistrict court.

The subdistrict court will grant the request if the tenant’s rights are not materially affected and the social position of the tenant compared to that of the landlord is such that he (the tenant) does not reasonably need that protection.

The starting point here is that the court will in principle exercise restraint in approving linking provisions. However, if there is a joint request from the franchisee and the franchisor before entering into the lease and franchise relationship, in which the parties involved also put forward arguments that substantiate that the assessment criteria stated above are met, the subdistrict court may grant the request. assigns.

It becomes considerably more difficult if (only) the franchisor applies to the subdistrict court during the term of the lease to still approve the linking provision. In that case, it is more nuanced whether the subdistrict court judge will grant the request, but it is not impossible. Furthermore, the franchisor/landlord runs the risk that the franchisee/lessee will nullify the clause before approval is granted. Approval of a clause that is deemed not to have existed is not possible. It is therefore very important to request the subdistrict court judge to approve the linking provision before entering into the franchise and rental agreement or to do so well-considered during the process. If desired, Ludwig & Van Dam Advocaten can assist you in guiding this process.

Ludwig & Van Dam franchise attorneys, franchise legal advice