Column Franchise+ – Franchisor acts unlawfully by providing a forecast through a third party
Disputes about forecasts between franchisor and franchisee remain a hot topic in franchising. After the Street-One judgment, it seems that franchisors feel safe by letting third parties draw up the forecasts, preferably on behalf of the franchisee himself. But is this correct?
The well-known Street-One judgment emphasized that a franchisor acts unlawfully towards the franchisee if a franchisor independently conducts research in a careless manner and, as a result, provides incorrect results to the franchisee. However, if a third party – not on his behalf – has drawn up a prognosis, he is in principle not liable unless the franchisor is aware of errors and has failed to communicate these errors to the franchisee.
Recently, the court once again shed light on a prognosis issue. The franchisee has entered into the franchise agreement on the basis of forecasts provided to him, which forecasts are far from being fulfilled.
The financial calculations with regard to the expected turnover have been provided to the franchisee by an administrative office and therefore a third party. There is discussion between the parties as to who is the client for the preparation of these turnover forecasts.
Because the competition was not sufficiently taken into account in the turnover forecasts and, moreover, a comparison was made with three other franchise locations that were not representative for the determination of the turnover forecasts for the franchisee, this constitutes an incorrect location investigation and the franchisor is therefore acting unlawfully towards the franchisee.
Although a trend has emerged as a result of the Street-One Judgment whereby franchisors outsource the preparation of turnover forecasts to third parties and/or the drawing up of these turnover forecasts is commissioned (at least on paper) by the franchisee, this is not always evident sufficient to avoid liability.
In short, as a franchisor you are not automatically exempt from liability if it provides (unsound) forecasts to the franchisee via a third party that the franchisor has not engaged. A franchisor must also act carefully when providing information to this third party.
Click here for the published article.
mr. M. Munnik – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to munnik@ludwigvandam.nl .
Other messages
Error in prognosis dealer agreement (or franchise agreement)
On November 11, 2014, the subdistrict court in The Hague ruled on whether an appeal to error in entering into a rental and dealer agreement was successful
Eviction of the franchisee from the leased property in preliminary relief proceedings
Eviction of the franchisee from the leased property in preliminary relief proceedings
Verdict of unsound prognosis Albert Heijn
Verdict of unsound prognosis Albert Heijn
mr. AW Dolphijn: Incorrect prognosis from Albert Heijn to exC1000 franchisee
mr. AW Dolphijn: Incorrect prognosis from Albert Heijn to exC1000 franchisee
NFV course for franchisees by mr. Th.R. Ludwig
NFV course for franchisees by mr. Th.R. Ludwig
Incorrect prognosis from Albert Heijn to ex-C1000 franchisee
On December 3, 2014, the District Court of the Northern Netherlands ruled on a dispute in which the attorneys of the Supermarkets section of Ludwig & Van Dam assisted a former C1000 entrepreneur