According to the franchise agreement, the franchisor was obliged to provide the franchisee with a reasonable customer base. In order to provide a reasonable customer base, the franchisor was obliged not to open another supermarket in the immediate vicinity of the franchisee’s supermarket, if such opening would result in a “considerable” reduction of the franchisee’s customer base.
The franchisor decided to open a new supermarket within 3 km. (2 miles) from the franchisee’s supermarket. According to an expert’s report, the franchisee’s turnover dropped with approximately 12-18 % in the three following years. The franchisee claimed that such drop was considerable, and a consequence of the opening of the new nearby supermarket and that the franchisor was therefore in breach of the franchise agreement.
The case was decided this year by the Danish Western High Court who ruled in favor of the franchisor. The court found that the opening of the supermarket had a noticeable negative influence on the franchisee’s customer base and therefore also on the franchisee’s turnover. However, the court found that this influence was not “considerable” why the franchisor was not in breach of the franchise agreement. The franchisee’s claim for damages was therefore dismissed.
Peter Gregersen, IDI Country Expert for agency & distribution in Denmark