Franchisee does not achieve operating forecast: the interim score.

Court of Roermond

Recently, the court in Roermond rendered an interim judgment between a franchisee and a franchisor, whereby the turnover was one third lower than budgeted by the franchisor. In general, the franchisor’s duty of care entails that the principles on which the franchisee starts his business must be correct.

This concerned the takeover of an existing establishment. The franchisor could therefore know very well what was feasible on the basis of historical turnover figures. 

The parties litigate back and forth and submit no fewer than four reports. Franchise and franchisor have contributed so much that it seems inevitable that a lengthy and costly procedure seems unavoidable. The judge therefore aims for a hearing in which the parties can still settle if possible. 

In the case of unsatisfactory financial forecasts, it is particularly important which assumptions are used. In other words, whether the underlying business location investigation was in order. If there was no location investigation, the franchisor would in principle lose its first line. Now that the parties are submitting contradictory reports, it is up to the court to make a decision if the hopeful settlement is not realised. It would be good if the parties allowed jurisprudence with regard to unrealized forecasts to lead to a final solution in the short term, so that further litigation is avoided. To be continued! 

Mr Th.R. Ludwig  – Franchise attorney

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