Franchise, distribution and agency

Frequently Asked Questions

Our clients often ask the following questions. Do you have any other questions or would you like to submit a dispute to us? Call us at +31 20 301 55 55 without obligation or send us an e-mail.

• • What’s the difference between distribution and agency?

    Distribution agreements and agency agreements are often confused. That’s logical, as there are many similarities. However, there are a number of significant differences between distribution and agency:

    • The agent acts in the name and for the account and risk of the supplier of the product or manufacturer (the principal), whereas the distributor is considered to be a self-employed entrepreneur who acts on behalf of himself and at his own account and risk.
    • Upon termination of the agency agreement, the agent is usually entitled to clientele compensation (goodwill indemnity). The distributor does not have this right.
    • The agency agreement is governed by law providing the agent with a certain protection, whereas the distribution agreement is not governed by law. As a result, parties to a distribution agreement are free to make the agreements they want to, and they specifically have to do so as otherwise nothing will be established.
    • The period of notice for a distribution agreement is usually much longer than the statutory notice period for an agency agreement.
  • Are distributor and supplier allowed to make price agreements?

    In a distribution agreement, parties can lay down agreements on the price the distributor has to pay for the purchase of the supplier’s products and services. However, agreements regarding the resale price (the price the distributor charges for the products of the supplier) are not always permitted.

    The supplier is allowed to impose on the distributor a maximum resale price or lay down a recommended price for resale. However, agreements on minimum prices or fixed resale prices are unlawful pricing agreements.

  • Is the agent entitled to goodwill indemnity in the event of termination of the agency agreement?

    In a termination of an agency agreement, the agent is in principle entitled to clientele compensation (also referred to as goodwill indemnity). This concerns compensation in the event the activities of the agent during the term of the agreement have led to an expansion of the customer base of the principal and the principal is likely to benefit from this expansion after the termination of the agreement.

    However, the principal doesn’t owe the agent goodwill indemnity if:

    • No new transactions can be expected from the clients acquired by the agent
    • The agent himself terminates the agreement
    • The agent transfers the agreement to a third party

• • Can I hold my franchisor liable for providing incorrect sales and profit forecasts?

    Before concluding a franchise agreement, the franchisor often provides the (potential) franchisee with a sales and profit forecast. When the expectations turn out to be unrealistic and the franchisee had never concluded the franchise agreement had the information been represented correctly, the franchisee is likely to recover the damage suffered from the franchisor.

    The damage can be recovered from the franchisor successfully if the franchisor himself has conducted the research regarding the sales and profit forecast or if it was conducted on his behalf by a person he is liable for (for instance, an employee). This can be the case even if he didn’t know that the information was incorrect but the mistakes in the report are due to negligence of the franchisor or the person he is liable for.

    When the franchisor contracted a third party for researching and reporting of the forecast, the franchisor may rely on the accuracy of the information provided by the third party. Then, he will in principle not be liable for the damage.

  • What do I have to deal with in a shop-in-shop agreement?

    In addition to arrangements regarding the amount of usage fee/lease, the term of the agreement and how it should be terminated, there are other important matters the operator of the main store and the operator of the shop-in-shop have to agree on. Think, for instance, of arrangements about the design, personnel and maintenance of the shop-in-shop.

  • What do you have to observe when entering into a pop-up store agreement?

    In a pop-up store agreement there must be clearly laid down that it is entered into for less than two years. To the lease of shop premises, in principle, the same rules apply as to the lease of commercial premises where termination of the agreement is difficult. This is not in line with the flexible nature of a pop-up store, but if a lease is entered into for two years or less these rules do not apply.

    In addition to the agreed lease period for the shop premises, on entering into the agreement the parties also have to take into account the following:

    • Local laws and regulations, such as the zoning plan
    • Necessary permits, such as an integrated environmental permit for rebuilding and/or advertising
    • Options for interim termination of the agreement, for instance if a permanent lessee is found for the premises
    • Liability in case of defects in or damage to the rented premises

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