Failure to provide the data underlying the forecasts will justify dissolution

Failure to provide information on which the forecasts are based, even if the cooperation has not yet started, may lead to a justified termination of the franchise agreement in advance.

Court of Arnhem

A veterinarian is considering joining a franchise organization aimed at pet clinics and concludes a (preliminary) agreement for this purpose. Part of this is assistance in obtaining financing and preparing forecasts.

After signing the preliminary and license agreement, the veterinarian finds out that the proposed financing arrangement no longer exists. In order to still be able to obtain financing and to properly assess the risks, the vet asks to submit all documents on which the prognoses are based. Despite repeated requests, these are not given to him, after which the vet finally dissolves all agreements in advance.

The franchise organization then claims compensation for non-compliance with the agreements. The vet claims back the payments already made and costs incurred.
First of all, the court rules that the franchise organization cannot hide behind the accountant who drew up the forecasts because the default of the forecasts was part of the agreements between franchisor and franchisee and the mere fact that the vet did pay the accountant directly does not matter in this regard. is of decisive importance, since that can also be part of the agreements.

The court also ruled that the veterinarian should not be denied (in good time) access to the examinations on which the prognoses are based. A single inspection is not sufficient for this. All the more so now that the financing arrangement no longer existed and it was unclear what would have replaced it.

By withholding the information, the veterinarian was in (too) great uncertainty with regard to the cooperation to be entered into, while the (preliminary) agreement was precisely intended to reduce this uncertainty. The court rules that the dissolution has been justified, so that the franchise organization is not entitled to compensation, but that the payments made by the vet must be reversed insofar as possible.

Commentary

The judgment shows once again that forecasts should always be based on sound and individualized factual data and that it is also necessary to request this in good time. Not only the forecasts, ie the results of those investigations, but also the investigations themselves, must therefore be available, so that it is clear how the results came about and where the risks and choices lie.

Furthermore  appears from the judgment that a franchisor does not easily evade his responsibility by referring to a forecast prepared by a third party. This is only possible if the franchisor has had no involvement whatsoever in its formation and has not been able to comment on it.

Ludwig & Van Dam franchise attorneys, franchise legal advice