The franchisee successfully appeals for error as a result of the forecast provided by the franchisor
Court of Utrecht
The court in Utrecht recently ruled in favor of a franchisee who argued during the court case that his franchisor had provided him with inadequate operating forecasts when entering into the franchise agreement. According to these forecasts, the franchisee could realize an acceptable turnover. The opposite turned out to be true – the franchisee achieved virtually no turnover. Nevertheless, after the early termination of the franchise agreement, the franchisor claims payment of (missed) fees from this franchisee and institutes legal proceedings.
However, the franchisee invokes error in the lawsuit; had he known how the proverbial ‘fork’ would really be ‘in the stem’, he would not have concluded the franchise agreement with the franchisor. The court accepts the defense and points out – among other things – that there is such a big difference between what the franchisor has forecast and what the franchisee has achieved in terms of turnover. Nor is it disputed by the franchisor that other franchisees also fail to meet the forecasts provided. The franchisor also apparently used historical data, even though this data dates from before the credit crisis. All this is reason for the court to assume that the forecasts provided by the franchisor are not sound.
The previous ruling ‘fits in’ completely with the line that the Supreme Court set almost 10 years ago and which has already been discussed several times in these articles. A franchisee must be able to rely on the accuracy of the forecasts provided to him by a franchisor. It obliges the franchisor to provide information based on sound grounds. Since the franchisee’s decision whether or not to participate in a particular franchise formula will largely depend on the return that can be achieved from the operation, this is without doubt justified.
Mr JH Kolenbrander – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to coalbrander@ludwigvandam.nl
Other messages
How do I keep my location? – June 6, 2019 – mr. K. Bastian
Location is of great importance to franchisors and franchisees, especially in the retail sector.
Supermarket letter – 25
Supermarket Newsletter No. 25
The benchmark for franchise forecasts – dated 29 May 2019 – mr. AW Dolphin
On 19 March 2019, the Den Bosch Court of Appeal, ECLI:NL:GHSHE:2019:1037, listed the case law of the Supreme Court on prognosis in franchising.
Franchise arbitration: too high a threshold? – mr. M. Munnik
When entering into an agreement, it is possible for the parties - contrary to the law - to designate a competent court. This also applies to the franchise agreement. Of this possibility
Franchise appeal for error due to incorrect forecasts and lack of support rejected – dated April 25, 2019 – mr. K. Bastian
The Court of Appeal of 's-Hertogenbosch ruled (ECLI:NL:GHSHE:2019:697) on the question whether the mere fact that forecasts did not materialize justifies the conclusion that the franchisee has been shortchanged...
Article De Nationale Franchise Gids: “Increasing protection against recruiting franchisees” – dated 2 April 2019 – mr. AW Dolphin
It is becoming increasingly apparent that recruited franchisees can be protected on the basis of the Acquisition Fraud Act.