A franchisee has successfully brought interlocutory proceedings against his franchisor Bruna. The court in interlocutory proceedings has judged as a preliminary measure that Bruna has to honour the franchise and (sub)lease agreement it terminated.
Introduction
Franchisee has operated a Bruna shop for over twenty-five years on the basis of a franchise and (sub)lease agreement. Both the franchise and the (sub)lease agreement contain a link, which means that if the franchise agreement ends, the (sub)lease agreement ends as well and vice versa.
At Bruna’s request, the bailiff has served by writ on 27 January 2017 a letter to the franchisee in which both the franchise agreement and the (sub)lease agreement were terminated per 31 January 2018 and 1 February 2018, respectively, without stating the reason for the termination. A month earlier, Bruna demanded payment from the franchisee for his arrears in payment of over eighty thousand euros to be paid within thirty days. Otherwise, Bruna threatened to stop deliveries.
The conflict
Following Bruna’s letter of notice, the franchisee brought interlocutory proceedings to compel Bruna to honour the franchise and (sub)lease agreement fully and properly. The franchisee had operated a Bruna shop for over 25 years and wished to continue this after 31 January 2018. Within this framework, the franchisee indicated that he depends on the continuation of the franchise agreement with Bruna for his and his family’s livelihood and that Bruna would be able to take over this shop virtually for free.
Furthermore, the franchisee stated that, in regard to his age in combination with his illness, it would be hard to find another job.
Moreover, the franchisee argued that he is still a more than excellent franchisee and that a reasonable ground for the termination of the franchise agreement is lacking.
During the interlocutory proceedings, Bruna made it clear that the termination of the franchise and (sub)lease agreement has not been dictated by the arrears in payment of the franchisee, but that it seriously doubts that the franchisee will be able to operate the Bruna shop in a profitable way. Due to his illness, the franchisee had not been able to work in the shop full time and was, therefore, forced to incur additional personnel costs. According to Bruna, this was the reason that the personnel costs were (too) high for a profitable operation.
Judgement
In the opinion of the court in interlocutory proceedings, substantive proceedings must show if the foregoing is a reasonable ground for the termination and whether it is plausible that the court in substantive proceedings will judge that not being able to operate the Bruna shop in a profitable way is a reasonable ground for terminating the franchise agreement. “In the context of these interlocutory proceedings, it is as yet unclear if that is the case”, says the court in interlocutory proceedings. Therefore, as a preliminary measure, Bruna must fully honour the franchise and (sub)lease agreement until the outcome of the substantive proceedings.
Consequently, franchisors should take heed when (intermediately) terminating the franchise and (sub)lease agreement.
For more information on franchise and lease agreements, please contact Sabriye Ort.
