The question of forecasts is at the heart of franchisor-franchisee disputes. This September’s ruling is an interesting illustration.
A franchisee, subject to a receivership proceeding, claimed to have been the victim of an “error concerning the profitability of the concept”.
However, the French High Court were not convinced by this reasoning, considering that prior to signing the franchise agreement, the franchisee had commissioned a 3-year forecasting study from a chartered accountancy firm, from which it emerged that :
- the franchise network he planned to work with was “dynamic and participative”,
- the manager had extensive commercial and management experience,
- the only weakness of the project was the existing competition
The Cour de Cassation agreed with the Court of Appeal, noting in particular that the franchisee was thus aware of the existence of increased competition in his area.
This ruling confirms – indirectly and if need be – the advice given to franchisors not to intervene in the preparation of business plans, projections and market studies, which are the responsibility of prospective franchisees.
