LE PLAY is a firm specializing in Franchise and commercial network. Our practice leads us to build and provide solutions to our clients in the reflection, implementation and day to day.
We have extensive experience in fast food networks. We easily understand the economics of these and often bring different practical solutions to optimize them turnover. For information and to allow you to think about these questions you will find below some information.
There’s no specific law regarding Franchise in France. There’s only certain formalities to be completed by the franchisor during the previous period to the conclusion of the franchise agreement (Loi Doubin).
Under a french definition franchise is a collaborative mode between two legally and financially independent companies (franchisee and the franchisor). It is a method that allows an independent undertaking faster by optimizing their chances of success and a franchisor to establish its commercial development on a network of business leaders involved in their local market.
To establish a franchise network and check that the concept works, it is recommended that the franchisor to create a commercial law company in France because it is always an issue when the franchisor abroad (limited liability company (SARL) or simplified anonymous company (SAS) and test the concept in two or three stores "pilots" for a period of two years (rule of 3/2).
The franchisor will thus ensure the enjoyment of rallying signs of customer at his disposal that is the trademark and the sign, architectural design, the visual identity system.
Following the opening of the "pilot" the future franchisor will be able to develop the rules of its franchise in particular to describe his "Know-How" (set of business methods, techniques, logistics, management, tried and tested by the franchisor).
This Know-how is secret (easily accessible by anyone outside the network), substantial (a competitive advantage for the franchisee and the consumer) and identified (documented in the operating manual or “Bible”). The franchisor must provide the franchisee who agrees to keep secret a confidentiality agreement that will be signed from the beginning of their business relations.
Franchisor ensures the franchisee technical and commercial support to mount the project, the opening of the point of sale and during the contract period. This support provides the franchisee an almost permanent transfer of know-how and its developments. It also allows the franchisor to verify the application of the concept.
Article L 330-3 of the Commercial Code (Doubin law) requires that before the conclusion of the franchise agreement, the franchisor must provide its prospective franchisees information that will help them make their decision knowingly. This step, called precontractual, is to allow each party to confirm his decision to cooperate. As the franchisor must provide honest information and complete as possible. It is embodied in a document called the pre-contractual information document (DIP). This document (DIP) shall be transmitted at least twenty days before the conclusion of the contract.
DIP usually contains :
- The last two balance sheets of the company of the franchisor
- The information necessary to evaluate the financial health and experience of the brand
- The state of the national and local market
- The full list of franchisees and contact information
- The number of franchise agreements completed last year issuing the document and the reason
- The duration of the proposed contract, the conditions for renewal, termination and transfer
Pursuant DIP’s signature the franchisor provides the written contract that sets out completely and specifies the rights, obligations and responsibilities of the parties. The contract must translate the strategy of the franchise network. It contains details of the resources needed to achieve the realization of the franchise concept and enables ongoing dialogue.
He recalled that the franchisor and the franchisee are two independent, who are not bound by any subordination link. Article L 441-1 of the Commercial Code provides that the franchisee inform the consumer of quality independent business, on all background papers, including of advertising, as well as inside and the outside the place of sale. Note that the drafting of these contracts and the exploitation of these require some experience to avoid an employment contract’s requalification.
The duration is set to allow the franchisee a reasonable capitalisation of its investments., inform the franchisor franchisee with sufficient notice of its intention not to renew the old contract came to an end or not to sign a new contract. The franchisor has no obligation to renew a franchise agreement. However, if the franchisor suddenly breaks the contract so that the franchisee thought he would continue, he may be guilty of abuse of rights. As part of the termination provisions, the contract gives the franchisee the opportunity to come into compliance within a reasonable time and list clearly the serious circumstances that can lead to termination without notice. In the event of termination or cancellation the franchisee must return all franchise elements such as teaches otherwise he may be guilty of copyright infringement or breach of trust. He must also pay the balance of the remaining charges due.
The conditions under which will be able to effect the assignment or transfer of rights under the contract are clearly specified, including the conditions for approval of a successor. The network interest can justify the existence of a right of first refusal in favor of the franchisor. The non-competition clause during the contract is justified by the protection of knowledge and, if applicable, by the franchisor's concern that the franchisee concentrate mainly in the joint project success. The financial obligations of franchisees are clearly specified and are established to support the achievement of common goals typically found payment of an entrance fee, an initial and ongoing formation, royalties rate and a contribution to national network of advertising (NAF) .Moreover the contract generally provides for the exclusive purchase of products manufactured by the franchisor or by a supplier but approved by the franchisor.
First of all the franchise
The contract generally provides for the settlement of disputes and the applicable law, it is often the Commercial Court of the franchisor headquarter and French law.