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Pre-contractual Information Obligation for the Franchisor; No General Obligation to Provide a Turnover Forecast

There is no general rule, under Dutch Caribbean law, that a franchisor should inform a franchisee about the expected turnover or profit. However, such an obligation may exist in specific circumstances, as recent case law illustrates. The case in question concerned a franchisee who had entered into a franchise agreement with a supermarket chain. In that context, the supermarket chain as franchisor had provided a turnover forecast to the franchisee. However, the weekly turnover of the franchisee remained far behind the forecast issued.

In legal proceedings the franchisee sought the annulment of the franchise agreement, stating that the prognosis issued by the franchisor was inadequate and that he was insufficiently informed about the expected turnover. The claim was awarded in the first instance but rejected in the appeal. The court of appeal considered (in short) that the supermarket chain as franchisor is not obliged to provide turnover forecasts to the franchisee at the pre-contractual stage. In addition, the court of appeal considered that the prognosis was made in a careful manner and was not inadequate. This decision is upheld in the cassation appeal.

The Supreme Court reiterates that there is no general rule that a franchisor should inform a franchisee about the expected turnover or profit. The special circumstances of the case may, however, entail such an obligation. However, such an obligation cannot be derived from the mere fact that the franchisor during the negotiations prior to the conclusion of the franchise agreement provided the franchisee with a report on the expected turnover.

The Supreme Court then considers that a franchisor who provides a report to his counterparty may, under certain circumstances, act unlawfully. In the event that the franchisor has outsourced the research and the preparation of the report based on it to a third party, a franchisor may as a rule rely on the correctness of the report drawn up by the third party. However, if a franchisor knows that this report contains serious errors and he does not inform his counterparty thereof, there may be negligence on the part of the franchisor. Another case in which there may be liability for the franchisor is the situation in which the franchisor himself carries out the research and provided the results to the other party without the franchisor knowing that the report contains errors, but that the negligence of the franchisor led to the errors in the report. In short, a franchisor is more liable for own (internal) turnover forecasts than for turnover forecasts of an external party.