Not providing market research to the franchisee remains without consequences for the franchisor

In a dispute between a supermarket owner and his former franchisor about information provided prior to the collaboration, the Court of Appeal of Den Bosch rendered judgment on 14 June 2016 (ECLI:NL:GHSHE:2016:2363).

In July 2007, the franchisee made agreements with the franchisor about the operation of the MeerMarkt supermarket formula. Prior to entering into the franchise relationship, the franchisor has provided the franchisee with a budget based on historical empirical figures. The imminent transfer of the MeerMarkt formula to Spar was known at that time. In 2008, the lease was transferred to a new franchisor and the franchisee started operating the Spar supermarket formula. Subsequent costs incurred by the franchisee turned out to be higher and the actual turnover achieved turned out to be lower than the former franchisor had forecast prior to the conclusion of the agreements.

According to the franchisee, he erred in concluding the agreements and the former franchisor acted unlawfully. The franchisee claims not to have entered into the agreements if the former franchisor had provided him with correct information or forecasts. According to the franchisee, the former franchisor should not have based the turnover forecast solely on the historical turnover data based on the existing MeerMarkt formula, but the former franchisor should have had a market survey carried out, taking into account the fact that the Spar has a more expensive price image compared to the MeerMarkt, which influences the store’s results.

The Court of Appeal ruled that the former franchisor had to provide correct information, but that the historical empirical data provided in question did not prove to be incorrect in itself. It was contractually stipulated that the franchisor must provide market research if available. However, no such report was found to be available. The franchisee has not put forward any facts or circumstances that imply that the franchisor was obliged to have a market research carried out in this case. The court therefore rejected the franchisee’s claims.

This statement reminds aspiring franchisees that it is important, even before or when entering into the franchise relationship with the franchisor, to agree, if desired, that certain information, such as a turnover forecast, a cost forecast, a market survey and a location survey will be provided to the franchisee will be provided. In the absence of special facts or circumstances, the failure to provide this information will in principle not lead to a claim of error by the franchisee or unlawful conduct by the franchisor that can be honored. According to the rules of conduct of the Dutch Franchise Code, it is preferable that the franchisor provides a cost and turnover forecast, a location survey and an investment and operating budget to the prospective franchisee, but a franchisor is in principle not obliged to do so.

mr. J. van de Peppel – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice.

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