Turnover and result: the principle of prudence
In various countries in the world, franchising is subject to increasingly stringent regulations. In general, these regulations mainly focus on what is so nicely called “pre-contractual disclosure” in English, known here in the Netherlands as pre-contractual information provision. In the Netherlands we find some rules in this regard in the European Code of Honor regarding Franchising, to which the members of the Dutch Franchise Association are bound in principle. Legislation, however, is not. In short, this means that prior to entering into a contract, a franchisor adequately informs its prospective franchisee(s) with regard to the turnover to be achieved with the franchised company and, more importantly, operating results. In France, an obligation to provide information in this regard has been included in legislation, in the United States and Australia, for example, this obligation extends much further. As mentioned, no such obligation has been included in legislation in the Netherlands, but it remains limited to the framework of the European Code of Honor. Nevertheless, and this has been discussed several times in this section, the provision of information that is as adequate as possible prior to the conclusion of a contract is of the utmost importance. Franchisees have a right to know what they are getting into. Incomplete or incorrect provision of information, leading to the conclusion of a contract, can also lead to substantial liabilities and problems in the business operations of both the franchisee and the franchisor. It is therefore not without reason that various countries have included this in legislation. Unlike in the Netherlands, there is therefore no freedom of choice regarding whether or not to present turnover and result forecasts.
In the Netherlands, there is that freedom of choice. A franchisor can therefore always refrain from giving indications about the turnover and results to be achieved with the franchise company. If a franchisor does provide such information, it should be recalled once again that this information must be based on a thorough and adequately conducted market and location survey, specifically tailored to the franchisee’s intended establishment in question. A critical attitude from the franchisor’s side to the results of such research is also appropriate, even if it is carried out by a market research agency. Due diligence must always be leading. The matter is important enough for that.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Unilateral increase in franchise fee
Unilateral increase in franchise fee
Franchise Frühstück Consultants House GmbH
On February 20, 2011, Mr. DL van Dam participated by invitation in a “Franchise Frühstück”, organized by Consultants House GmbH, Mr. Jörg Eckhold, one of the leading franchise co
Arbitration clause in general terms and conditions/franchise agreement
Recently, the Amsterdam Court of Appeal ruled on an issue centered around the question of whether the arbitration clause included in the general terms and conditions had been legally agreed upon.
The franchise agreement and the rental agreement, a desirable couple?
When a franchise agreement and a rental agreement coincide, one speaks
Formula switches from administrative office
In the present case there is talk of an administrative office that performs administrative work for the franchisees within a certain franchise formula.
Absence of (sub)lease agreement
A link between a franchise agreement and a rental agreement is a common phenomenon.