Fusion: is a franchisor required to provide revenue projections to a franchisee?

The short(est) answer is: no. There is no general obligation to provide sales forecasts. But if a franchisor provides sales forecasts, they must be correct! The Supreme Court recently confirmed this in a case between a franchisor and a franchisee. What was the case?

Before entering into a franchise agreement, both the (prospective) franchisor and the (prospective) franchisee want to know what to expect. In that context, sales and/or profit forecasts are often prepared by the franchisor. These are often shared with the franchisee. So too in this case, in which the operator of a C-1000 supermarket was considering continuing to operate his supermarket under the Albert Heijn banner. In the negotiations, Albert Heijn communicated to the operator a weekly sales forecast of approximately EUR 300,000.00. A short time later, they entered into a franchise agreement. In the first two years, sales were disappointing. The operator started proceedings against Albert Heijn. His point is that Albert Heijn had withheld an initial sales forecast. It had forecast significantly lower weekly sales of approximately EUR 250,000. The operator felt that this initial forecast should also have been shared with him. He argued that Albert Heijn had information on the basis of which it should have doubted the later (higher) forecast. He claimed a declaratory judgment that he had erred in entering into the franchise agreement.

Although the district court granted the operator's claims, he ultimately caught a bone in the court of appeals and the Supreme Court. They ruled that, in a general sense, there is no obligation for a franchisor to provide a sales forecast to a franchisee in the pre-contractual phase. Moreover, the initial forecast was not yet accurate enough to require the later (higher) forecast to be questioned. This judgment is in line with the line already initiated by the Supreme Court in 2002.

There is therefore no general obligation to provide sales forecasts prior to a franchise agreement. But if a franchisor decides to provide sales forecasts, it is important to handle them with care. If this is not done and the sales projections contain errors, the franchisor may be held liable. The Supreme Court ruled two years ago that a distinction must be made between sales forecasts prepared by the franchisor on the one hand and sales forecasts prepared by a third party engaged by the franchisor on the other. In short, the bottom line is that the franchisor is more likely to be liable if it provides a sales forecast prepared by itself, or by someone for whom it is liable. Indeed, in the case of an inaccurate sales forecast prepared by a third party, the franchisor is only liable if it was aware of its inaccuracy.
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