Restyling forecasts
As is well known, a good franchisor offers its franchisee a sound investment exploitation forecast at the start. It should be possible to derive the turnover and the result for the franchisee for a period of, for example, three years from this investment/exploitation forecast. It goes without saying that the franchisee has a great responsibility in this respect, by actively convincing himself of the correctness of the prognosis provided. If this prognosis is clearly incorrect, and the franchisee cannot be blamed for his efforts and diligence, then the responsibility for this can, under certain circumstances, be traced back to the franchisor. After all, as an experienced party with regard to the pretended success formula, he is expected to properly assess the correctness of the prognosis.
What is the situation now with the reorganization of the franchise formula? Are the responsibilities identical in the case of a major restyling, for example?
Every franchise formula has to deal with modernization and adaptation of the formula from time to time. Fashion chains, for example, usually have fast retail cycles. More than once, this means that substantial reinvestments must be made every few years. Sometimes this reinvestment takes place by the franchisor, suppliers and franchisees together, but sometimes a franchisee is faced with a very drastic reinvestment in the refinancing of his company. This situation is comparable to a pre-contractual phase. This means that the franchisor is also largely responsible for correctly assessing the feasibility and degree of success of the restyling. In that context, a good franchisor will once again provide a sound investment and operating forecast for a period of, for example, three years. Of course in that situation the franchisee has more experience than before. However, in the dependency relationship in which the franchisee also finds himself, the franchisor is nevertheless expected to adequately and correctly assess the correctness of this.
The franchisor and franchisees would be wise to proceed to a possible restyling on the basis of consensus and to make agreements for the rest if this unexpectedly turns out to be disappointing in individual situations.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.
Termination of franchise agreement in case of changes in leased retail space – September 27, 2019 – mr. AW Dolphin
Termination of a franchise agreement in light of a substantial change in the leased retail space.
Article De Nationale Franchisegids: “Distribution of (potential) customers prohibited?” – September 17, 2019 – mr. AW Dolphin
Within many franchise organizations, agreements are made about the recruitment of (potential) customers in a certain area.
District protection no protection against termination due to urgent own use – dated September 17, 2019 – mr. AW Dolphin
As a landlord, can the franchisor terminate the lease for urgent own use, in the sense of district protection, while this would be excluded on the basis of the franchise agreement.
Unreasonable compensation at the end of the franchise agreement – dated September 17, 2019 – mr. AW Dolphin
Some franchise agreements stipulate that the franchisee always owes the franchisor a minimum of a certain amount of costs upon termination of the franchise agreement.