Franchisors take note: accountability for forecast issued – December 28, 2015 – mr. AW Dolphin

Court of Appeal of ‘s-Hertogenbosch, dated 15 September 2015, ECLI:NL:GHSHE:2015:3583  

A judgment by the ‘s-Hertogenbosch Court of Appeal raised the question of who must now demonstrate that the franchisor’s prognosis was or was not sound. See Court of Appeal of ‘s-Hertogenbosch 15 September 2015, ECLI:NL:GHSHE:2015:3583 (To Fuel/franchisee).

The franchisor has a formula called To Fuel, aimed at operating shops at petrol stations. Entrepreneurs can become franchisees through so-called partner agreements. The franchisee accused the franchisor of having drawn up an incorrect forecast regarding the expected turnover/profit. It was objected to the franchisor that, due to errors in forecasting, the franchisee was in error. The main rule is that in that case the franchisee will have to provide proof of those errors. Sometimes the franchisee will have only a vague suspicion that something is wrong with the forecast. The Court of Appeal extends a helping hand to the franchisee here.

The forecast was based on the number of visitors to the gas station, the number of visitors to the shop and the average spending at a shop. The Court of Appeal orders the franchisor to provide further evidence of the correctness of the figures used on these three aspects. The franchisor must therefore account for the way in which it made forecasts. The assertion that visitor numbers are based on empirical figures must also be further substantiated by the franchisor, for example by submitting annual accounts or an auditor’s report.

If it appears from the account given that the prognosis contains errors, the appeal to error may succeed. The Court of Appeal adds that it does not matter whether the errors can be attributed to the franchisor itself or to one or more third parties (HR 25 January 2002, ECLI:NL:HR:2002:AD7329, legal ground 3.3.2). .

Although in principle the burden of proof of an unsatisfactory prognosis lies with the franchisee, the franchisor will have to provide insight into how the prognosis was arrived at. This means that it is important for franchisors to be able to provide sound numerical justification for the prognosis issued.

mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl