Supreme Court: Code of Honor regarding franchising has no legal effect – dated September 25, 2018 – mr. AW Dolphin

On 21 September 2018, the Supreme Court ruled that the European Code of Honor on Franchising is not a benchmark for legal beliefs in the Netherlands. This Code of Honor states that a franchisor must provide the prospective franchisee with all available information and other data, such as a forecast, before concluding the franchise agreement. That obligation is therefore not enforceable.

The case concerned a franchisor who had indicated that he was committed to the European Code of Honour. The franchisor had prepared an initial forecast that was less rosy than the one the franchisor ultimately provided. The franchisee believed that the initial prognosis should also have been provided and referred to the obligations under the Honor Code. The Supreme Court ruled that the franchisor has no obligation to provide a prognosis and therefore also not the initial prognosis. According to the Supreme Court, the fact that the franchisor had committed itself to the Code of Honor does not change this, because the Code of Honor is not enforceable.

Providing information prior to concluding a franchise agreement is one of the cabinet’s spearheads in the preparation of franchise legislation. The above judgment appears to underline the need for regulation by the legislator of the franchisor’s obligation to provide complete and sufficient information prior to the conclusion of the franchise agreement. The aspiring franchisee would do well to at least request all much-needed information and to be critical of this.

mr. AW Dolphin  – franchise lawyer

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