Is franchising always the right form of cooperation?
Franchising is in most cases a form of cooperation that can bring great benefits to all involved, the proverbial “win-win situation”. Evidence of the success of franchising can be seen in multiples in every shopping center in the Netherlands. In a relatively short period of time, the phenomenon of franchising has spread to virtually all sections of society.
Franchise concepts therefore come in an enormous variety, from shoemakers to fast-food restaurants and from courier services to drugstores. The variation in activity that lends itself to franchising therefore seems endless. However, there are limits to that. Practice shows that not all franchise concepts, sometimes started with good courage and good intentions, lead to success. In general, it is extremely difficult to indicate where the boundary lies in that context. An important rule of thumb is that, perhaps, of course, the franchisee can generate sufficient turnover with the business to be operated by him, which, when compared to his operating costs, produces an adequate operating result from which to live. That goes without saying, of course, but in practice it sometimes happens that concepts meet that requirement in theory, but prove difficult to handle in practice. It goes without saying that concrete examples cannot be given here, but where some business activities as (part of) a branch company, belonging to a larger whole, can be an adequate addition to the total package that the company concerned offers to the end user, the same activity can be used for a franchisee simply offer too little economic basis. In order to anticipate these problems, it is therefore always advisable to open one or more pilot locations of the franchise concept to be launched on the market and to actually operate it for a considerable period of time, so that the (potential) franchisor knows from his own experience whether the concept is suitable to be operated as a franchise concept. Incidentally, members of the Dutch Franchise Association are already obliged to do so under the European Code of Honor on Franchising, which explicitly states the desirability of a pilot location.
As an extension of the above, the prognosis problem has already been discussed several times in this section. Does a (potential) franchisor paint a too rosy picture?
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
The benchmark for franchise forecasts – dated 29 May 2019 – mr. AW Dolphin
On 19 March 2019, the Den Bosch Court of Appeal, ECLI:NL:GHSHE:2019:1037, listed the case law of the Supreme Court on prognosis in franchising.
Franchise arbitration: too high a threshold? – mr. M. Munnik
When entering into an agreement, it is possible for the parties - contrary to the law - to designate a competent court. This also applies to the franchise agreement. Of this possibility
Franchise appeal for error due to incorrect forecasts and lack of support rejected – dated April 25, 2019 – mr. K. Bastian
The Court of Appeal of 's-Hertogenbosch ruled (ECLI:NL:GHSHE:2019:697) on the question whether the mere fact that forecasts did not materialize justifies the conclusion that the franchisee has been shortchanged...
Article De Nationale Franchise Gids: “Increasing protection against recruiting franchisees” – dated 2 April 2019 – mr. AW Dolphin
It is becoming increasingly apparent that recruited franchisees can be protected on the basis of the Acquisition Fraud Act.
The Franchise Association and Franchise Binding – Contracting 2019, No. 1
A contribution on common provisions in franchise agreements that require a franchisee to be a member of a franchisee's association.
Deception in recruiting a franchisee?
A ruling on whether the franchisor had made a misrepresentation when recruiting a franchisee.