Not providing market research to the franchisee remains without consequences for the franchisor
In a dispute between a supermarket owner and his former franchisor about information provided prior to the collaboration, the Court of Appeal of Den Bosch rendered judgment on 14 June 2016 (ECLI:NL:GHSHE:2016:2363).
In July 2007, the franchisee made agreements with the franchisor about the operation of the MeerMarkt supermarket formula. Prior to entering into the franchise relationship, the franchisor has provided the franchisee with a budget based on historical empirical figures. The imminent transfer of the MeerMarkt formula to Spar was known at that time. In 2008, the lease was transferred to a new franchisor and the franchisee started operating the Spar supermarket formula. Subsequent costs incurred by the franchisee turned out to be higher and the actual turnover achieved turned out to be lower than the former franchisor had forecast prior to the conclusion of the agreements.
According to the franchisee, he erred in concluding the agreements and the former franchisor acted unlawfully. The franchisee claims not to have entered into the agreements if the former franchisor had provided him with correct information or forecasts. According to the franchisee, the former franchisor should not have based the turnover forecast solely on the historical turnover data based on the existing MeerMarkt formula, but the former franchisor should have had a market survey carried out, taking into account the fact that the Spar has a more expensive price image compared to the MeerMarkt, which influences the store’s results.
The Court of Appeal ruled that the former franchisor had to provide correct information, but that the historical empirical data provided in question did not prove to be incorrect in itself. It was contractually stipulated that the franchisor must provide market research if available. However, no such report was found to be available. The franchisee has not put forward any facts or circumstances that imply that the franchisor was obliged to have a market research carried out in this case. The court therefore rejected the franchisee’s claims.
This statement reminds aspiring franchisees that it is important, even before or when entering into the franchise relationship with the franchisor, to agree, if desired, that certain information, such as a turnover forecast, a cost forecast, a market survey and a location survey will be provided to the franchisee will be provided. In the absence of special facts or circumstances, the failure to provide this information will in principle not lead to a claim of error by the franchisee or unlawful conduct by the franchisor that can be honored. According to the rules of conduct of the Dutch Franchise Code, it is preferable that the franchisor provides a cost and turnover forecast, a location survey and an investment and operating budget to the prospective franchisee, but a franchisor is in principle not obliged to do so.
mr. J. van de Peppel – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to vandepeppel@ludwigvandam.nl
Other messages
Fine for franchisor because aspiring franchisee is foreigner
On 5 July 2017, the Council of State, ECLI:NL:RVS:2017:1815, decided whether, in the case of (proposed) cooperation between a franchisor and a prospective franchisee, the franchisor
Article in Entrance: “Company name”
“I came up with a wonderful name for my catering company and incurred the necessary costs for this. Now there is another entrepreneur who is going to use almost the same one. Is that allowed?"
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled
Supermarket letter – 18
Can an entrepreneur be obliged to operate a different supermarket formula?