The Bottom Line
- No Automatic Renewal: A fixed-term franchise agreement does not automatically create a right to renewal. A franchisor can let the contract expire if the franchisee fails to meet clear, reasonable performance standards.
- Improvement Plans are a Shield: Proposing a formal improvement plan with measurable targets (like clearing debt and providing financial security) is a powerful tool for franchisors. If the franchisee fails to meet these terms, it strengthens the franchisor’s position not to renew.
- Early Communication is Crucial: The court heavily weighed the fact that the franchisor (ASICS) communicated its concerns and the conditional nature of renewal more than a year before the agreement’s expiry date, preventing any claims of surprise or unfair termination.
The Details
This case involved a dispute between the global sports brand ASICS and one of its French franchisees. With their five-year agreement approaching its end, ASICS informed the franchisee that due to performance issues, particularly significant payment arrears, the contract would not be renewed unless specific improvements were made. ASICS proposed an improvement plan, which required the franchisee to clear its outstanding debt and provide financial guarantees. Despite months of negotiations and extended deadlines, the parties could not agree on the plan, and the franchisee failed to meet the core financial requirements. Consequently, ASICS let the agreement expire as scheduled.
The franchisee sued, arguing that the non-renewal was unlawful and contrary to the principles of ‘reasonableness and fairness’ under Dutch law. They claimed ASICS had created a legitimate expectation that the relationship would continue. The District Court of Amsterdam decisively rejected this argument. It ruled that ASICS had acted properly by flagging the performance issues well over a year in advance and clearly stating that renewal was contingent on measurable improvements. By providing a clear path forward—which the franchisee failed to follow—ASICS fulfilled its duty of care and was well within its rights not to renew the fixed-term contract.
The franchisee also filed counterclaims, alleging that ASICS had breached the agreement in various ways, such as failing to provide adequate training, imposing a restrictive return policy, and causing delivery issues. The court dismissed all these claims. It found that ASICS had either fulfilled its contractual duties (for example, by offering training, even if it was in English) or that the franchisee’s own failures, such as not following correct return procedures, were the root cause of the problems. This thorough dismissal of the counterclaims further solidified the court’s view that the non-renewal was justified.
Source
Rechtbank Amsterdam
