Signing a franchise agreement marks the start of a collaboration that, ideally, should be beneficial to both parties. If the franchisee undertakes to respect a concept and pay royaltiesThe franchisor, on the other hand, is not simply a collector. He is the guarantor of the proposed model and assumes a set of obligations that are crucial to the success of his partners. Understanding exactly what you are entitled to expect from your franchisor is essential if you are to navigate the contract smoothly and defend your interests. For a broader understanding of franchise contract, its definition and operationTo find out more, read our dedicated article. This article details the fundamental duties of the franchisor, those that form the very heart of the franchise relationship, as well as certain additional commitments that are frequently encountered.
The franchisor's essential obligations: the heart of the contract
Certain obligations are imposed on the franchisor by the very nature of the franchise agreement. They are the essence of the agreement, and failure to comply with them may call into question the balance, or even the validity, of the agreement.
Passing on and updating know-how
This is undoubtedly the most emblematic obligation. The franchisor undertakes to communicate specific know-how to the franchisee. Let's recall what this notion implies: it is a set of practical information, resulting from the franchisor's experience, which must be secret (not generally known or easily accessible), substantial (useful and providing a competitive advantage) and identified (precisely described, often in an operating manual). This know-how must have been previously successfully tested by the franchisor. This experience is a pillar of the formation of the franchise contract and the pre-contractual information owed to the franchisee. An untried concept, with franchisees as the first testers, does not meet the definition of a franchise, even if case law is sometimes flexible on the requirement of a "pilot unit" before the network is launched.
The obligation does not end with the initial transmission. The know-how is not set in stone. The franchisor must update and develop it constantly to maintain the network's competitive edge in the face of changes in the market, techniques or consumer expectations. This ongoing adaptation is an essential part of the franchisor's commitment. The franchisor must also take the necessary steps to protect this know-how against unlawful use by third parties or former franchisees, in particular through unfair competition actions or by invoking the protection of business secrecy when the conditions are met.
Providing distinctive signs (brand, sign)
Joining a franchise means benefiting from the reputation of a recognised brand and name. The franchisor therefore has a fundamental obligation to grant the franchisee the right to use its distinctive signs (brand, trade name, logo, etc.). This concession generally takes the form of a brand licence integrated into the franchise contract.
In addition to granting the licence, the franchisor must ensure that it does in fact hold the rights to these signs and that they are validly protected (valid trademark registration, renewal carried out, etc.). If the franchisor loses its rights over the trademark, or if it turns out that it was not the owner, the contract may be null and void. The franchisor must also defend the trademark against infringement or misuse by third parties that could damage the network's image.
Provide ongoing support (commercial, technical)
Franchising is not simply the sale of a "turnkey" concept. The franchisor is required to an obligation to assist the franchisee throughout the term of the contract. This assistance has several facets:
- Initial assistance : Help with starting up the business (finding premises in certain cases, initial training for franchisees and their staff, help with fittings, etc.).
- Ongoing support : It can be commercial (management advice, national marketing campaigns, network promotion, ongoing training, etc.) or technical (support in using specific tools, updating processes, IT assistance if software is required, etc.).
It is important to note that the obligation to provide assistance is generally considered by the courts as a "duty of care". obligation of meansand not of results. This means that the franchisor must make reasonable efforts to assist its franchisees, but it is not a guarantee of their individual success. In the event of a dispute, it is up to the franchisee to prove that the franchisor has failed in its duty to assist (lack of visits, training, response to requests, etc.). A proven breach may justify a claim for damages, or even termination of the contract against the franchisor. For a better understanding of the issues involved in termination of the franchise contractSee our dedicated article.
Maintaining and promoting the network's image
A network's strength lies in its consistency and reputation. The franchisor, as conductor of the orchestra, has an obligation to maintaining a common identity and brand image of the network. On the one hand, this means ensuring that all franchisees comply with the concept's standards (power to monitor and punish breaches), because the behaviour of a single member can have a negative impact on all the others.
On the other hand, the franchisor must actively promote the brand at national or regional level. It is often in return for this obligation that franchisees pay a specific advertising fee. The franchisor must therefore undertake relevant communication and marketing actions to support the reputation and attractiveness of the network.
Ensuring transparency and fairness
The franchise relationship is a partnership that must be based on trust and loyaltyThis is a general principle governing the performance of contracts (article 1104 of the French Civil Code). The franchisor, who holds a dominant position in the relationship, is bound by a duty of loyalty. special transparency obligation.
This transparency is expected in particular with regard to the use of funds collected as advertising royalties. Franchisees are entitled to know how this money is spent and whether the actions taken really benefit the entire network. Similarly, if the franchisor acts as a central purchasing or referencing body, it must be able to justify the conditions negotiated with suppliers and the fair passing on of any advantages obtained (discounts, rebates, etc.). A lack of transparency on these points may conceal conflicts of interest or breaches of the obligation to seek the best terms for franchisees.
In addition to transparency, the franchisor must demonstrate reliability and competence in the management of its concept and its network. Franchisees pay an entry fee and royalties for a reason. They have a right to expect a professional, organised partner, capable of anticipating changes and responding effectively to the needs of the network.
Guaranteeing identical treatment between network members
The coherence of the network also requires the franchisor to ensure that equal treatment between its various partners. It cannot favour certain franchisees to the detriment of others without objective and relevant justification.
This requirement also extends to relations between franchisees and any branches operated directly by the franchisor. The franchisor may not use its own sales outlets to compete unfairly with its franchisees, for example by imposing less favourable supply conditions or by concentrating its advertising efforts solely on its branches. The so-called "Huard" case law (initially concerning oil contracts, but which can be transposed) has penalised a supplier who does not put its distributors in a position to charge competitive prices. Loyalty requires the franchisor to ensure the overall balance of the network.
Frequent additional commitments
In addition to this essential base, the franchise agreement may include other obligations for the franchisor, depending on the nature of the business and the negotiations between the parties.
The obligation to supply (distribution franchise)
In the case of product distribution franchises, the contract logically provides for a obligation for the franchisor (or a designated central) to supply the goods to the franchisee, in accordance with the orders and the general conditions of sale. The franchisee must be able to rely on regular, compliant supplies to operate his business.
Territorial exclusivity (if applicable)
Even if it is not an essential element of any franchise, theterritorial exclusivity is very common. The contract may prohibit the franchisor from setting up another franchisee, or even a branch, in a defined geographical territory granted to the franchisee. There are different degrees of exclusivity (simple franchise exclusivity, location exclusivity, supply exclusivity), the scope of which must be clearly defined in the contract.
A particularly sensitive point today concerns how this exclusivity relates to sales made by the franchisor on the Internet. The majority of case law considers that the creation of a merchant website by the franchisor does not constitute a breach of the territorial exclusivity granted for a physical outlet (Com. 14 March 2006). This position is open to criticism, as it may render the exclusivity devoid of substance and transform the franchisee into a mere "showroom", bearing the costs of a physical shop without benefiting from the online sales generated in its area. Aspiring franchisees are therefore strongly advised to negotiate specific clauses to govern online sales: commission on sales delivered to the area, an advantageous "click and collect" system, a ban on more aggressive online promotions than in shops, etc. Otherwise, the economic equilibrium may be upset.
Priority obligation (if applicable)
The contract may grant the franchisee a right of priority for the opening of a new outlet in a neighbouring area or for a new concept developed by the franchisor. This is a preference agreement, the conditions of which must be specified.
The obligation to take back stocks at the end of the contract (if provided for)
For a distribution franchisee, the question of what to do with remaining stocks at the end of the contract is crucial. In the absence of a specific clause, the franchisor is generally not obliged to take them back. It is therefore a good idea for the franchisee to negotiate a clause obliging the franchisor to buy back unsold stock (often subject to certain conditions: new condition, lower purchase price, etc.). This limits financial losses at the end of the partnership.
In conclusion, the franchisor is not only a grantor of rights, but also a partner with substantial and ongoing obligations. The proper performance of these obligations is a prerequisite for the success of the network and the long-term survival of the franchised businesses.
If you feel that your franchisor is not honouring its contractual or legal commitments, do not hesitate to contact our firm to discuss your options and possible courses of action. Drawing on our expertise in commercial lawWe'll be happy to advise you.
Sources
- Civil Code, in particular articles 1104 (Good faith), 1194 (Consequences of contract).
- Commercial Code.
- Case law from the Cour de cassation and the Courts of Appeal relating to the franchisor's obligations (know-how, assistance, trademark, exclusivity, online sales, equal treatment, etc.).
EN 
FR