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
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.
Article De Nationale Franchise Gids: “Information obligations of the intended franchisee under the Franchise Act” – dated August 7, 2020 – mr. AW Dolphin
Although the purpose of the Franchise Act is to protect franchisees against franchisors, a number of obligations have also been laid down for franchisees.
Legislative text of the Franchise Act – dated July 24, 2020 – mr. AW Dolphin
The legal text of the Franchise Act was published in the Staatsblad on 1 July 2020. The full legal text reads as follows:
Law Franchise – dated July 23, 2020 – mr. AW Dolphin
The Franchise Act will have a considerable impact on both franchisors and franchisees.
Contractual dissolution requirements not observed? No legal dissolution of the franchise agreement – dated July 23, 2020 – mr. C. Damen
Can a franchisor terminate the franchise agreement if it has failed to comply with its own contractual requirements?