Forecasts at startup franchise formula

The Amsterdam Court of Appeal ruled on 14 February 2017, ECLI:NL:GHAMS:2017:455 (Tot Straks/franchisee) on the question whether the franchisor had provided an unsatisfactory prognosis and whether the franchise agreement had been legally annulled on the grounds of error. This involved a new concept to be rolled out “Tot Straks”. 

A starting franchise organization has acquired a franchisee with promotional e-mails, among other things. In these e-mails, the question is asked, among other things: “Do you want at least € 1,000 extra turnover per week?” and “Do you want € 60,000 extra turnover at least per year?”. 

In addition, a franchisee is quoted as being positive about the franchise formula and saying, among other things, that he has generated 25% more turnover since the start of the franchise. In response to this, the (then) aspiring franchisee contacted the franchisor by telephone. The franchisor has offered to give a presentation, which has been done. 

At that presentation, a number of sheets were shown with financial figures. The franchisor states that it is a reflection of the potential of the franchise formula, based on the number of inhabitants and households in a certain place. 

It has also been established that the prospective franchisee has been verbally assured three times that the turnover would be enough to pay the franchise fee, that the turnover would be high enough after a few months so that the franchisee would no longer have to help in the business. , and certainly a higher turnover than € 1,000 per week would be achieved. 

The parties then conclude a franchise agreement. Immediately after the start of operation under the franchise formula, the franchisee is full of praise and announces that after 30 days of uninterrupted work, Wednesday will be the day off. Subsequently, the franchisee reports that the results are disappointing and eventually annuls the franchise agreement extrajudicially because of the allegedly unsatisfactory prognosis. 

The Court of Appeal ruled that, at the time of entering into the franchise agreement, the franchisee was aware that the Tot Straks branch in Amsterdam had been operating for some time, but that two other Tot Straks branches had only recently become operational and had not yet realized a turnover. could be spoken. The franchisee knew, or should have known, that the forecasts provided by the franchisor are based only on the results of the Tot Straks branch in Amsterdam. 

In addition, the Court of Appeal ruled that it had not been stated sufficiently concretely and with reasons why the forecasts made by Tot Straks on the basis of the turnover of the branch in Amsterdam were apparently incorrect. 

Moreover, the prospective franchisee has not adequately fulfilled its obligation to investigate, on the one hand because it has not been established that Tot Straks supported its forecasts with any report at the time, and on the other hand because the aspiring franchisee has filled in the promotional e-mails of Tot Straks with the necessary information. had to take grains of salt because those e-mails apparently had a promotional character and he was aware that only one branch of Tot Straks was operational to a relevant extent, namely the one in Amsterdam. 

The conclusion can be drawn from this ruling that commendations in general terms, even if they are untrue, do not in themselves have to constitute a lack of will (compare Article 3:44 paragraph 3 DCC). This may apply even more if there is no permanent and proven successful franchise formula with hardly any franchisees (yet). With such startup franchise formulas there is more uncertainty. In those situations, under certain circumstances, a prospective franchisee may be able to rely less on recommendations from the franchisor and investigation may be expected of the prospective franchisee. 

mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .