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Franchising and the Law

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Franchising and Law

I recently read a really interesting newsletter from Eurofranchise Lawyers about a number of franchise cases that went to court in various European countries. I thought I would summarise a couple that stood out to me but if you wish to view the full newsletter then go to: http://gallery.mailchimp.com/d2590a475d216704aa084b56e/files/203_04_17_Newsletter_EFL.PDF

Is a franchisee a self-employed person entering into a commercial contract or are they entering an employment contract?

This is a situation faced by one oil company franchise in Belgium. The set up of the agreement was as such:

–          The dealer sold fuel on behalf of the oil company  and was paid commission on the sale of the fuel

–          The dealer had their own shop which he had full control of the only exception was that the oil company rented the premises to the dealer.

–          The oil company earned royalties on the sales made in the shop.

However, after a couple of years the franchisee claimed that he felt he was actually an employee of the larger company and sued the company to gain the benefits that he felt were owed under an employee contract.

The court examined the content of the agreement between the franchisee and franchisor which covered a number of duties that the franchisee had to comply with in particular:

–          Recording sales data

–          Setting of prices

–          Transfer of fuel sales proceeds to franchisor

–          Adhering to the company’s marketing strategy

–          Wearing the correct uniform

–          Issuing invoices in the name of the franchisor

This meant that there was a close economic dependency between the franchisee and franchisor but on this basis the court did not deem the relationship to be that of employer and employee. However, the court felt that there were also many limitations placed on the franchisee for example, not being able to change the layout of the shop or selecting most of the shop’s products. Due to the economic dependency and limitations placed on the franchisee the court ruled that the contractual relationship could be deemed as an employment contract.

Franchisees gambling with c-store money

This case affected a c-store chain in Denmark. The agreement was such that at the end of the day the franchisee would transfer a certain amount of money into the franchisor’s bank account. However, instead of doing so the franchisee was a pathological gambler and withheld some of the money for his own use. The franchisor noticed that this was happening and terminated the agreement. The case was taken to court and the franchisee was penalised accordingly.

Have you ever experienced situations like this? Let us know your story.

Author: retailaccounting

CounterBooks is an online retail accounting management suite which is used by retailers across the world.

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