The North Holland District Court recently once again confirmed the strong position of franchisees under the Franchise Act. This time it concerned a dispute between the Association of Albert Heijn Franchisees (VAHFR) and Albert Heijn Franchising (Vereniging, “AHF”). It revolved around the introduction of the delivery service Maaltijd Thuis (“Meal Delivered Home”) and the question of whether this should be regarded as a so-called “derived franchise concept” within the meaning of article 7:911(2) of the Dutch Civil Code. This matters because it determines whether AHF should have obtained prior consent from the franchisees before introducing it.
In this blog we discuss the key points from this ruling and set out what this means for your franchise business.
How did the dispute arise?
AHF decided to introduce the new concept Maaltijd Thuis without obtaining prior approval from the franchisees. This is a delivery service for ready-made meals that makes use of the well-known Albert Heijn brand and logo. The franchisees considered this unacceptable and took the view that Maaltijd Thuis qualified as a derived concept. This is because it largely involves the same products that fall under the Albert Heijn concept, but with delivery added. The franchisees feared that introducing this would lead to lost revenue.
AHF disputed this and argued that consent was not necessary, since no significant loss of revenue was to be expected. In the run-up to this dispute, AHF had repeatedly tried to agree a threshold value for expected revenue loss with the franchisees, but these proposals were rejected each time by the VAHFR. AHF asked the court to declare that the franchisees had not behaved as good franchisees by repeatedly rejecting these proposals.
What did the court rule?
The court ruled that Maaltijd Thuis is indeed a derived concept. This means AHF should have sought prior consent from the franchisees before rolling out the concept. It does not matter whether the expected loss of revenue is large or small, as long as some loss of revenue can reasonably be foreseen. This is an important confirmation of franchisees’ right to exert influence over changes that may affect their business operations.
The court also rejected AHF’s claim, in which it had asked for the franchisees to be obliged to agree a threshold value. The court ruled that, while the VAHFR had indeed not behaved as a good franchisee, it also pointed to the need for AHF to negotiate reasonably with the franchisees first.
Significance of this ruling.
This ruling confirms the strength of the Franchise Act and the protection it offers franchisees. As a franchisor, it is crucial to always respect franchisees’ rights, especially when introducing new services or concepts. Do not forget that you must seek consent where there is a derived concept or other changes that affect the franchisee’s business operations. Failing to respect these rights can lead to legal problems, such as liability for damage caused by lost revenue.
For franchisees, it is important to stay alert to new initiatives that may affect their business. At the same time, it is also important to always conduct yourself as a good franchisee. Adopt a constructive attitude, negotiate in a timely manner, and think along with developments within the franchise concept. This not only helps prevent conflicts, but also contributes to the joint growth of the franchise organisation.
