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24 March 2015
A commercial agent generally has a right to compensation against the principal at the end of a contract (Section 89b of the Commercial Code). This is intended to provide reasonable consideration for the fact that during the agreement, the commercial agent has established and maintained a customer base for the principal from which the principal continues to profit.
For authorised dealers, the Federal Court of Justice has repeatedly clarified (eg, BGH ZIP 2000, 138) that a right to compensation by analogous application of Section 89b arises in comparable situations if the authorised dealer:
In principle, Section 89b can also be applied to other salespersons (BGH, April 29 2010, VIII ZR 283/96 JOOP!).
However, the Federal Court of Justice has yet to clarify expressly whether Section 89b also applies analogously to franchise agreements. In addition, it has always left open whether and, if so, how the conditions for analogous application thus developed would apply to franchise agreements. Some courts and opinions regard the mere de facto continuity of the customer base as adequate (ie, the customers remain with the franchisor).(1)
This question has considerable significance for franchise systems in anonymous mass business – for example, restaurants, filling-station shops or (as in the present case) bakery franchise systems in which the franchise agreements rarely oblige the franchisee to assign the customer base.
In a February 5 2015 decision the Federal Court of Justice clarified that for franchising, mere de facto customer continuity is inadequate for the right to compensation by analogous application of Section 89b.
The franchisor operated a bakery chain. More than 90% of the participating bakeries in Germany were conducted by franchise partners.
The agreements with the relevant franchisee expressed no obligation to assign the customer base or customer data when the agreements ended; only the leased business premises were to be returned. The agreements were ended by a termination agreement.
The insolvency administrator appointed over the franchisee's assets claimed approximately €116,000 compensation from the franchisor.
According to the insolvency administrator, the conditions for analogous application required for such a claim were satisfied because, in the case of purely anonymous mass business without recording customers (eg, bakeries), a legal obligation to assign the customer base cannot be relied on. In addition, with the surrender of the shop, the assignment of the customer base created by the franchisee automatically takes place.
According to the Monchengladbach Regional Court (January 9 2012, 8 O 71/11) and the Dusseldorf Higher Regional Court (May 3 2013, I-16 U 36/12), the Federal Court of Justice did not accept these arguments and dismissed the claim for compensation.
The Federal Court of Justice based its decision on the fact that, in any event, the conditions for analogous application of Section 89b were not fulfilled.
The court outlined the extent to which the relevant legal questions have been dealt with in the judgments on authorised dealers. The court has previously found that the obligation to assign the customer base need not arise expressly and directly from the written agreements, but can arise from other obligations. However, it also clarified that purely de facto continuity of the customer base of the dealer is inadequate (Federal Court of Justice NJW 2000, 1413).
The same applies to franchise agreements. Like an authorised dealer, a franchisee works in its own name and establishes its own customer base accordingly. Unlike a commercial agent, the franchisee pursues its own customer base to develop its own business, not that of a third party. There is therefore no adequate similarity of interests in a case concerning a commercial agent with mere de facto continuity of the customer base.
Franchisees cannot therefore rely on the fact that they conduct a mainly anonymous mass business and do not record customer data. Such an anonymous customer base is not automatically useful to the franchisor at the end of the agreement. For example, this possibility is restricted if the franchisee operates a business at the same location (under its own name). In such case the franchisor would not profit from the franchisee's customers in such a manner that the latter would be entitled to compensation.
The contractual obligation to surrender the leased business premises does not justify a compensation claim either. The Federal Court of Justice based this on the reference to leasing law, according to which the lessee's surrender obligation does not lead to a compensation claim for any added value of the location which has accrued.
The Federal Court of Justice decision is welcome. The court again left open the question of whether Section 89b applies analogously to franchise agreements. Nevertheless, the decision has substantially increased legal certainty for franchisors and franchisees.
Franchisors will no longer be exposed to the risk of a claim under Section 89b if their agreements do not contain an obligation to assign the customer base and such an obligation does not arise from other circumstances. However, franchisees will also benefit, because legal certainty regarding this issue will assist them in negotiations (eg, on the franchise fee).
For further information on this topic please contact Karsten Metzlaff at Noerr LLP's Berlin office by telephone (+49 30 20 94 20 00) or email (firstname.lastname@example.org). Alternatively, contact Karl Rauser at Noerr's Munich office by telephone (+49 89 28 62 80) or email (email@example.com).The Noerr LLP website can be accessed at www.noerr.com.
(1) Hanau Regional Court, May 28 2002, 6 O 106/2001; Berlin Regional Court, September 6 2004, 101 O 23/04; contrary to, for example, Monchengladbach Regional Court, June 29 2010, 3 O 324/09 (for further details please see "De facto retention of customer base establishes no Section 89b claim").
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