Forecasts and liability: sometimes look further
The regular visitor to this site will undoubtedly be aware that in franchise relationships the turnover and profit forecasts provided to the franchisee at the start of the franchise relationship are regularly the subject of dispute, in particular when these are not used by the franchisee in question. achieved. Particularly when the financing profile of the franchisee’s company is geared to those forecasts, failure to achieve the forecasted sales and results to a relevant extent can lead to difficult business situations, and in some cases even bankruptcies and the like. It is now settled case law that a franchisee can, under certain circumstances, hold his franchisor liable for the damage suffered by him as a result of this. In many cases, this is a one-on-one discussion between those directly involved in the conflict. In some cases, however, the franchisor himself has been misled when drawing up or assessing the offending forecasts. Of course, many franchisors themselves draw up their own forecasts based on empirical data. However, these are often drawn up by a market research agency or, for example, by a supplier of the services that are the subject of the franchise formula. It is then important for all parties involved to take this into account. Primarily for the franchisor, who may find in that third-party data supplier a possible lightning rod, to whom he can pursue his liability, for example through an indemnification procedure. This is also relevant for the franchisee. It often happens, especially in these times of crisis, that franchisors, especially when they are approached by several franchisees at the same time, do not survive a prognostic conflict. Pursuing liability can, under certain circumstances, mean the difference between bankruptcy or the continued existence of the organisation, and placing the liability where it belongs. It is therefore important for all those involved in these types of issues to thoroughly delve into the real and deeper causes of the problem, so that those who are really responsible are involved in the right way.
Mr DL van Dam – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Mail to info@ludwigvandam.nl
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