Under French law, the franchise contract is an innominate contract: there is no provision in the Commercial Code that defines it or sets out a specific regime for it. It is case law, and to a lesser extent European distribution law, that have gradually established its essential characteristics. This relative vacuum has a direct practical consequence: anything that you have not negotiated and put down in writing will not exist, or will be interpreted against you.<\/p>\n
This guide explains the legal implications of the franchise contract, from the first meeting with the franchisor right through to leaving the network. It is aimed at both prospective franchisees assessing an opportunity and existing franchisees seeking to understand their rights in the face of a defaulting franchisor.<\/p>\n
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The Cour de cassation has laid down the essentials in a few words: the franchise contract is a contract of repetition. The franchisor has developed a commercial concept that works. The franchisee pays to reproduce it and benefit from the brand image of the franchise network. Behind this simple formula lie three essential obligations, which form the hard core of the contract.<\/p>\n
Le know-how<\/strong> is the first component. It is a set of practical, secret, substantial and identified information resulting from the franchisor's experience. \u00abSecret\u00bb does not mean patented: it is sufficient that the information is not generally accessible or known. \u00abSubstantial\u00bb means that the know-how must give the franchisee a real competitive advantage. The transmission of know-how that is empty or accessible to any competitor may result in the nullity of the contract for lack of consideration (art. 1169 of the Civil Code). In 2013, the French Supreme Court (Cour de cassation) issued a timely reminder that the validity of a contract must be verified on the basis of the existence of a competitive advantage before the existence of formal know-how (Com. 10 Dec. 2013, no. 12-23.115).<\/p>\n La provision of distinctive signs<\/strong> - brand and trade name - is the second pillar. Franchisees sign up precisely because they want to benefit from a well-known brand image. The franchisor must have secured his rights over these signs: valid registration with INPI, renewal carried out. If these rights do not exist or are contested, the contract may be null and void. The franchisor must also actively defend the brand against third parties who misuse it.<\/p>\n L'ongoing assistance<\/strong> is the third pillar, and the one that generates the most disputes. Contrary to popular belief, this obligation does not end after the initial training: it lasts throughout the contract. It covers both sales (running the network, marketing initiatives, management consultancy) and technical support (IT tools, updating processes, operational support). It is an obligation of means, not of result. In the event of a dispute, it is therefore up to the franchisee to prove any shortcomings - which in practice means keeping a written record of all unanswered requests.<\/p>\n \u00abThe franchise contract provides the franchisee with a sign, a brand, know-how and, in line with this, ongoing assistance. The franchise contract is a repeat business contract\u00bb. Franchising is also exclusive of any legal dependence: the franchisee remains a company separate from the franchisor, which distinguishes it from a branch or branch manager.<\/p>\n<\/p><\/div>\n La trademark licence<\/strong> differs from franchising in that it involves neither the transmission of know-how nor an obligation to provide assistance: the licensee uses the brand but remains free to choose his own methods. The exclusive concession<\/strong> gives the licensee the exclusive right to sell a brand's products in an area, but without transferring any of its own know-how. The affiliate commission<\/strong>, Finally, the affiliate is in the position of an agent acting in the name and on behalf of the network head: unlike the franchisee, he does not own his stock and does not bear the commercial risk.<\/p>\n These distinctions are not merely theoretical. They determine the regime applicable in the event of a dispute, in particular whether the pre-contractual information obligation in article L. 330-3 of the French Commercial Code applies. The Court of Cassation has broadened the scope of this article: it applies where one person makes a trade name, brand or trade name available to another and requires exclusivity or quasi-exclusivity, even if the contract is not described as a \u00abfranchise\u00bb (Com. 19 Jan. 2010, no. 09-10.980).<\/p>\n <\/p>\n Doctrine and practice distinguish three forms depending on the purpose of the concept transmitted. The production franchise<\/strong> implies that the franchisor itself manufactures the products marketed under its brand: this is the case for many food or cosmetics brands. The distribution franchise<\/strong> is the most widespread: the franchisor selects products and makes them available to its franchisees, who sell them under the network's brand name. The service franchise<\/strong>, is based on the transmission of know-how in the provision of a service - fast food, vehicle hire, consultancy, maintenance.<\/p>\n This classification is not neutral. In distribution franchising, the franchisor's obligation to supply is often central and may be the subject of specific litigation if the supply is deficient or if the pricing conditions applied by the network's central purchasing body are not fair. In service franchising, it is the consistency and up-to-dateness of the know-how passed on that is the focus of disputes.<\/p>\n <\/p>\n The Doubin Law of 31 December 1989, codified in articles L. 330-3 and R. 330-1<\/strong> of the French Commercial Code, requires franchisors to provide prospective franchisees with a pre-contractual information document (DIP) at least twenty days before signing the contract or making any payment. This is the most tangible protection available to prospective franchisees before they make a commitment.<\/p>\n The implementing decree lists the compulsory information: presentation of the franchisor and the group to which it belongs, general and local market conditions, list and contact details of franchisees in the network, annual accounts for the last two financial years, duration of the contract, conditions for renewal, termination and transfer, and above all the information enabling applicants to draw up their own operating forecasts. This last requirement is the source of the most litigation.<\/p>\n The operating forecasts submitted by some franchisors sometimes reflect a golden reality, based on the results of the network's best sales outlets. If these forecasts are deliberately unrealistic - and the franchisor knew this - this is fraud. Proof is hard to come by, but it is possible, in particular by comparing the forecasts submitted with the actual results of franchisees in comparable areas.<\/p>\n The twenty-day period runs from the date the contract is signed, not from the date it takes effect (Com. 17 July 2001, no. 98-19.258). It must also be respected when the contract is renewed - even tacitly - as the Cour de cassation considers that renewal gives rise to a new contract (Com. 9 Oct. 2007, no. 05-14.118). The franchisor, as the professional debtor of an obligation to provide information, bears the burden of proving that the DIP has been delivered and that this period has been observed.<\/p>\n This period is not just a formality. It is there to allow the candidate to check the information provided, to consult existing franchisees, and to submit the document to an advisor. In practice, some franchisors use commercial pressure to shorten this period. Any payment made before the expiry of the twenty days is automatically returned if the contract is not concluded.<\/p>\n An incomplete or erroneous DIP is not sufficient in itself to render a contract null and void. It must be shown that the missing or erroneous information was decisive for consent: if the candidate had known, he would not have signed. This is the condition for a defect in consent on the grounds of fraud (art. 1137 of the Civil Code). The intentional nature of the breach must also be established: the franchisor must have kept silent with full knowledge of the facts.<\/p>\n In 2024, the Commercial Chamber of the French Supreme Court (Cour de cassation) laid down an important rule: a franchisor who intentionally remains silent about insolvency proceedings that have arisen within the network after the DIP has been submitted and before the contract has been signed is committing fraudulent concealment, which may vitiate the franchisee's consent. The Court of Appeal was censured for merely noting that the initial DIP contained the prescribed information, without investigating whether any subsequent silence was deliberate. This decision obliges franchisors to spontaneously update their information up to the date of signature.<\/p>\n<\/p><\/div>\n <\/p>\n Once the contract has been signed, the franchisor's obligations are not limited to collecting royalties. Three of them are part of the essence of the contract: failure to comply with them may justify termination to the detriment of the franchisor and trigger his contractual liability.<\/p>\n The transmission of know-how is not limited to the handing over of an operating manual on joining the network. The franchisor is required to continue to pass on the know-how throughout the term of the contract, and above all to update it as the market evolves (C. civ., art. 1194). A franchisor who freezes his concept for five years without adapting it to changes in the sector is in breach of his obligations. Know-how that no longer provides a competitive advantage is no longer know-how in the legal sense of the term.<\/p>\n It is important to note that the franchisor must first have tested his concept - the idea of a \u00abpilot unit\u00bb is regularly discussed in case law. A concept that the first franchisees are asked to test is not know-how for the purposes of franchising. A clause whereby the franchisee acknowledges that he is a \u00abtester\u00bb of the concept would render the contract null and void.<\/p>\n The franchisor must maintain valid rights to the licensed trademark and sign, ensure their renewal, and defend them against third parties. If the franchisor loses its rights over the trademark, or if it is discovered after signing that these rights did not exist, the contract will be null and void (CA Paris, 12 Sept. 2018). This obligation also means not tolerating misuse by other members of the network that would damage the common brand image.<\/p>\n The brand licence granted to the franchisee is generally incorporated into the contract itself. Its conditions - duration, terms of use, prohibitions - must be read carefully. If the franchisee's business is sold, the question arises as to whether the licence is transferable: the franchise contract is generally concluded intuitu personae, which makes it difficult to transfer the licence to a third party.<\/p>\n The Paris Court of Appeal firmly stated that \u00abproviding assistance to the franchisee is one of the franchisor's essential obligations, irrespective of any specific contractual stipulation\u00bb. This commercial and technical assistance covers at least two aspects. The commercial dimension: regular visits to the field, ongoing team training, national events, management advice. The technical dimension: support for the IT tools required by the franchise network, updating of processes, assistance with operational difficulties.<\/p>\n This obligation is continuous: it lasts throughout the contract, not just at start-up. A breach of this obligation - absence of visits, failure to respond to requests from the franchisee, inadequate initial training - may justify a request for termination to the detriment of the franchisor. But it is up to the franchisee to prove this. Hence the importance, for a franchisee in difficulty, of systematically documenting breaches: unanswered emails, rejected training requests, non-existent visit reports.<\/p>\n <\/p>\n The counterpart of the franchisor's obligations is the payment of a fee and compliance with the concept. The entrance fee<\/strong> is paid when the contract is signed: it remunerates integration into the franchise network and the initial provision of know-how. The amount varies from brand to brand. The fees<\/strong> (Royalties are calculated as a percentage of sales - generally between 3 % and 8 % - and paid periodically. A specific advertising royalty may also be added, to finance national marketing campaigns.<\/p>\n Over and above the remuneration, the franchisee is obliged to respect the concept transmitted - methods, presentation standards, supply conditions if the contract provides for exclusivity in this respect. They are subject to the franchisor's right of control, who may carry out checks and, in the event of serious breaches, trigger the resolutory clause. The franchisee is also bound by an obligation of confidentiality regarding know-how, which survives the end of the contract.<\/p>\n The franchise relationship is based on loyalty (art. 1104 of the French Civil Code). This requirement is reciprocal. A franchisee who operates a competing concept in parallel with his franchised business, or who tries to poach other franchisees, is in serious breach of his obligations. A franchisor who favours certain franchisees to the detriment of others, or who unfairly competes with his franchisees via his own e-commerce site, is in breach of his obligations.<\/p>\n <\/p>\n The standard franchise agreement is drawn up by the franchisor. Unlike in the case of commercial leases, there are no texts limiting contractual freedom in this area. Article 1190 of the Civil Code - according to which a contract is interpreted against the drafter - is the only general protection available to the franchisee in the event of an ambiguous clause. Three types of clause merit particular attention.<\/p>\n Territorial exclusivity is not an essential element of a franchise agreement: it must be expressly stipulated (Com. 9 Nov. 1993). If the contract provides for it, the territorial exclusivity clause must be defined precisely: is it a question of exclusivity to set up new sales outlets, exclusivity to supply, or exclusivity to sell? These three concepts are very different.<\/p>\n The major pitfall is e-commerce. The majority of jurisprudence considers that the creation of a merchant site by the franchisor does not constitute a violation of the territorial exclusivity granted for a physical sales outlet. To put it plainly: even if you have exclusivity in your geographical area, the franchisor can sell directly online to customers in your territory. This position, which may seem shocking, turns the franchisee into a mere physical relay of a network whose value is captured by the online franchisor. It is essential to negotiate specific clauses on this point before signing: commission on orders delivered in the area, local preference system for allocating online orders, guaranteed price parity between the physical and digital channels.<\/p>\n On leaving the network, the franchisee may be prohibited from engaging in a competing activity. These clauses, known as non-competition or non-reaffiliation clauses, are lawful provided they are limited in time and space, and proportionate to the legitimate protection of the franchisor (know-how and network). The Macron Act of 2015 did not fundamentally change the commercial law regime: unlike labour law, no financial consideration is required for the validity of a commercial non-competition clause.<\/p>\n The Court of Cassation has upheld a non-reaffiliation clause - prohibiting membership of a competing network - provided that it was limited in time and space and did not prohibit the pursuit of any identical commercial activity (Com. 28 Sept. 2010, no. 09-13.888). A clause prohibiting any similar activity throughout France for five years would be voidable as disproportionate.<\/p>\n Franchise agreements frequently provide that the franchisor may unilaterally modify the concept, products, methods and even the rate of royalties. The Court of Cassation has accepted the validity of this clause, including with regard to royalties (Com. 1 Dec. 2021, no. 18-26.572). This means that a franchisor can legally increase your fees during the term of the contract if the contract so provides.<\/p>\n Abuse of this unilateral power is still punishable. A franchisor who imposes a complete overhaul of the graphic charter one month after opening, at a cost equivalent to several months' sales, without giving reasonable notice, is committing an abuse. It is advisable to negotiate precise safeguards: a minimum period before any changes requiring investment, a ceiling on the cost per square metre, a reinforced right to exit if the changes exceed a certain threshold.<\/p>\n <\/p>\n Leaving the network is often the most conflictual moment in the relationship between franchisor and franchisee. The disadvantages of each outcome - non-renewal, termination, early termination - must be anticipated at the initial negotiation stage. There are three possible situations.<\/p>\n Franchise contracts are generally concluded for a fixed term, varying between five and ten years. When the contract expires, there are two possible outcomes. If there is a tacit renewal clause, the contract is automatically renewed for a further period - but the franchisor must then submit a new DIP, as the renewal gives rise to a new contract. If the franchisor decides not to renew, he is not required to give reasons for his decision, unless the renewal clause contains a specific obligation to do so.<\/p>\n Non-renewal is therefore not in itself wrongful. It is the natural right of any co-contractor at the end of a fixed-term contract. It does not entitle the franchisee to compensation, unless otherwise stipulated. The question of what happens to the commercial lease<\/a> of the outlet is often more worrying than that of the franchise agreement itself.<\/p>\n Before the expiry date, termination requires serious misconduct on the part of either party. Most franchise contracts include a resolutory clause allowing the franchisor to terminate the contract after formal notice has been served but without effect. If it is the franchisee who wishes to terminate, he or she must demonstrate that the franchisor has seriously breached his or her essential obligations - lack of assistance, non-existent know-how, loss of the trademark. These breaches must be documented and, if possible, formal notice given in writing.<\/p>\n If the franchisor terminates the contract unfairly, he must compensate the franchisee for the consequences. If it terminates a contract containing a non-competition clause, it must compensate the franchisee for the loss resulting from the prohibition imposed - the franchisee is not bound by the clause if it is the franchisor who causes the termination (Com. 23 Oct. 2012, no. 11-21.978). The situation of a collective procedure<\/a> The administrator may continue or assign the current contracts, and the franchisee may find himself tied to a buyer that he has not chosen.<\/p>\n One of the most contentious issues at the end of the contract is that of customer ownership. The franchisee is an independent trader who has developed a personal customer base in his area. The franchisor has no rights over this customer base in the strict sense. However, access to customer data - customer files, cash register data, loyalty data - is often controlled by the franchisor's IT systems. At the end of the contract, the franchisee may find himself deprived of a tool that he has helped to develop.<\/p>\n When negotiating the contract, it is important to make explicit provision for the franchisee's right to recover their own customer data at the end of the contract. Otherwise, there is a real risk of leaving the network without being able to retain a customer base that you have built up yourself.<\/p>\n <\/p>\n Solent Avocats advises franchisors and franchisees on the drafting, negotiation and termination of franchise agreements. We advise on domestic and international law.<\/p>\n Discover our expertise in commercial law<\/a>\n <\/div>\n <\/p>\n On related subjects: the commercial lease<\/a> the franchisee's point of sale, the unfair competition<\/a> in the event of a breach of the non-reaffiliation clauses, and the stakes of a safeguard procedure<\/a> against the franchisor or franchisee.<\/p>\n There is no legal requirement for a franchise agreement to be in writing. In practice, the contract is always drawn up in writing, if only because the franchisor must submit a DIP and because the clauses are too complex to remain oral. An unwritten contract would be valid, but would be extremely difficult to prove in the event of a dispute.<\/p>\n<\/details>\n No. Territorial exclusivity is not an essential element of a franchise agreement: the Court of Cassation made this clear as early as 1993 (Com. 9 nov. 1993, no. 91-20.382). It must be expressly stipulated. If there is no clause, the franchisor is free to set up other franchisees or its own branches in your area.<\/p>\n<\/details>\n Yes, if a unilateral amendment clause so provides. The Court of Cassation has accepted that such a clause is valid, including for royalties (Com. 1 Dec. 2021, no. 18-26.572). Abusive use of this power may nevertheless justify termination to the detriment of the franchisor and\/or compensation. In the absence of a clause, any change in fees requires the agreement of both parties.<\/p>\n<\/details>\n The opening of insolvency proceedings against the franchisor does not automatically terminate the franchise agreement. The receiver may choose to continue or terminate the contract. The franchisee may request termination if the franchisor no longer fulfils its essential obligations. The DIP should have included information about any insolvency proceedings in the network: failure to do so may constitute fraudulent concealment (Com. 26 June 2024, no. 23-14.085).<\/p>\n<\/details>\n Early termination of a fixed-term contract is only possible in the event of serious misconduct on the part of the other party or if the contract contains a resolutory clause. Apart from these cases, unilateral termination exposes the franchisee to the payment of royalties remaining due until the end of the contract, or even a penalty clause. It is essential to document the franchisor's failings before any termination.<\/p>\n<\/details>\n <\/p>\n Signer un contrat de franchise, c’est int\u00e9grer un r\u00e9seau \u00e9prouv\u00e9 tout en restant commer\u00e7ant ind\u00e9pendant. Un \u00e9quilibre d\u00e9licat, encadr\u00e9 par des r\u00e8gles pr\u00e9cises que le contrat respecte rarement sans n\u00e9gociation.<\/p>","protected":false},"author":0,"featured_media":0,"parent":18290,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/template-guide-enfant.php","meta":{"footnotes":""},"solent_domaine":[445,412],"class_list":["post-18372","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/types\/page"}],"replies":[{"embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/comments?post=18372"}],"version-history":[{"count":1,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18372\/revisions"}],"predecessor-version":[{"id":18373,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18372\/revisions\/18373"}],"up":[{"embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18290"}],"wp:attachment":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/media?parent=18372"}],"wp:term":[{"taxonomy":"solent_domaine","embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/solent_domaine?post=18372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Franchise, concession, affiliation: differences that count<\/h3>\n
The three types of franchise<\/h2>\n
The pre-contractual information document (PCD): your first line of defence<\/h2>\n
What the DIP must contain<\/h3>\n
The 20-day time limit: real protection<\/h3>\n
What should I do if the DIP is incomplete or misleading?<\/h3>\n
The franchisor's obligations during the contract<\/h2>\n
Passing on and updating know-how<\/h3>\n
Provide brand and signage<\/h3>\n
Ongoing assistance: obligation of means, not of result<\/h3>\n
The franchisee's obligations<\/h2>\n
Contract clauses to be examined carefully<\/h2>\n
Territorial exclusivity - and the e-commerce trap<\/h3>\n
Post-contractual non-competition clause<\/h3>\n
Unilateral amendment clause<\/h3>\n
How does a franchise contract end?<\/h2>\n
On expiry: renewal or non-renewal<\/h3>\n
Termination for non-performance<\/h3>\n
The question of customers and goodwill<\/h3>\n
Do you have a dispute with your franchisor?<\/h2>\n
Frequently asked questions about franchising<\/h2>\n
Do franchise agreements have to be in writing?<\/summary>\n
Is territorial exclusivity automatic in a franchise contract?<\/summary>\n
Can the franchisor change the royalties during the term of the contract?<\/summary>\n
What happens if the franchisor goes into receivership?<\/summary>\n
How do I get out of a franchise contract early?<\/summary>\n
Sources and legal references<\/summary>\n
Legal texts<\/h3>\n
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Case law<\/h3>\n
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