The franchisee successfully appeals for error as a result of the forecast provided by the franchisor
Court of Utrecht
The court in Utrecht recently ruled in favor of a franchisee who argued during the court case that his franchisor had provided him with inadequate operating forecasts when entering into the franchise agreement. According to these forecasts, the franchisee could realize an acceptable turnover. The opposite turned out to be true – the franchisee achieved virtually no turnover. Nevertheless, after the early termination of the franchise agreement, the franchisor claims payment of (missed) fees from this franchisee and institutes legal proceedings.
However, the franchisee invokes error in the lawsuit; had he known how the proverbial ‘fork’ would really be ‘in the stem’, he would not have concluded the franchise agreement with the franchisor. The court accepts the defense and points out – among other things – that there is such a big difference between what the franchisor has forecast and what the franchisee has achieved in terms of turnover. Nor is it disputed by the franchisor that other franchisees also fail to meet the forecasts provided. The franchisor also apparently used historical data, even though this data dates from before the credit crisis. All this is reason for the court to assume that the forecasts provided by the franchisor are not sound.
The previous ruling ‘fits in’ completely with the line that the Supreme Court set almost 10 years ago and which has already been discussed several times in these articles. A franchisee must be able to rely on the accuracy of the forecasts provided to him by a franchisor. It obliges the franchisor to provide information based on sound grounds. Since the franchisee’s decision whether or not to participate in a particular franchise formula will largely depend on the return that can be achieved from the operation, this is without doubt justified.
Mr JH Kolenbrander – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to coalbrander@ludwigvandam.nl
Other messages
Judge anticipates Franchise Act: no mandatory formula change (without threshold value)
The District Court of Amsterdam ruled that a Blokker franchisee is not obliged to renovate the store in accordance with the latest formula principles, as instructed by Blokker.
Interview Mr. J. Sterk and mr. C. Rutten in Franchise+: “Call to the automotive sector: prepare yourself well for the new Franchise Act” dated October 2, 2020
The new Franchise Act has a broad effect, also in the automotive sector. But are people aware of it enough?
Article The National Franchise Guide – “Corona discount of 50% on the rent” – mr. AW Dolphijn – dated September 15, 2020
Disappointing turnover due to the corona crisis may mean that the rent is halved, even if the rent is partly turnover-related.
Article Franchise+ – “Franchisor uses “derivative formula” (without his knowledge)” – mr. AW Dolphijn – dated September 9, 2020
Many franchisors will not be aware of the fact that they use a "derived formula" as referred to in the Franchise Act.
Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement?
Article Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement