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
The manager (employee) who becomes a franchisee – fictitious employment?
On 14 December 2016, the subdistrict court judge of the District Court of Noord-Holland, ECLI:NL:RBNHO:2016:11031 (Employee/Espresso Lounge), considered the situation in which an employee
The Supreme Court sets strict requirements for franchise forecasts
A ruling by the Supreme Court on Friday casts a new light on the provision of profit and turnover forecasts to aspiring franchisees.
Infringement of exclusive service area by franchisor in connection with formula change dated February 27, 2017
On 30 January 2017, the provisional relief judge of the District Court of Noord-Holland, ECLI:NL:RBNHO:2017:688 (Intertoys/franchisee), was asked how to deal with the
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
Mandatory transfer of franchise business to franchisor?
On January 23, 2017, the District Court of Amsterdam, ECLI:NL:RBAMS:2017:412 (CoffeeCompany/Dam Spirit BV) rendered a judgment on the question whether a franchisee upon termination of the cooperation
Transfer customer data to franchisor
In its judgment of 10 January 2017, ECLI:NL:GHAMS:2017:68 (OnlineAccountants.nl), the Amsterdam Court ruled, among other things, on the question of how customer data should be transferred.