Franchisor liable for forecasts from third parties – dated March 6, 2019 – mr. M. Munnik

According to established case law, a franchisor acts unlawfully towards its franchisee when a franchisor independently conducts research in a careless manner and, as a result, provides incorrect revenue forecasts to the franchisee. If, on the basis of correct turnover forecasts, the franchisee would not have concluded the franchise agreement or would not have concluded it under the same conditions, the franchisee can also invoke error.

To limit this risk, more and more franchisors are opting to outsource the preparation of a forecast to a third party. After all, as long as the franchisor is not aware of errors in the forecast drawn up by a third party, he is in principle not liable for this. However, the East Brabant District Court recently ruled that the franchisor is not automatically immune from liability in that case either.

In the dispute in question, an expert has been engaged to draw up turnover forecasts for a flan shop. The franchisor provides an expert with crucial data for the purposes of the forecasts: he expects 300 pies to be sold per week at a certain price in the first year. In addition, data was provided from three other branches. Based on this, the expert has drawn up turnover forecasts for the first three years.

In retrospect, it appears that the three branches were not representative of the operation of this franchise branch and that sales of 300 pies per week were nowhere near achieved. However, the franchisor takes the position that it is not responsible for the turnover forecasts issued because it has not drawn them up. The court does not agree.

The court ruled that although the franchisor did not state detailed turnover amounts, it did provide all the information necessary to calculate the turnover amounts in a simple manner. The court qualifies the information as a turnover forecast of the franchisor. According to the court, the fact that the parties differ on the question of who the client was is not an issue here.

Although the preparation of forecasts is often outsourced to third parties, in practice fundamental information is often still provided on the basis of which the turnover forecasts are calculated. The above ruling makes it clear that in that case a franchisor cannot simply shift its responsibility to a third party.

In short, a franchisor must also act with due care when providing information to a third party for the purpose of making a forecast.

mr. M. Munnik – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice.

Do you want to respond? Go to munnik@ludwigvandam.nl