France

• Author: Rémi Delforge - Gilles Menguy
• Pages: 164-192

164 International Franchise Sales Laws

France

I. What Is a Franchise?

A. Scope of Law

1. Definition of a Franchise

The only trace in French statutes of a definition goes back to a November 29, 1973

administrative order. It defined a franchise agreement as an agreement by which

one entity, in exchange for fees, grants to other independent entities the right to use

its commercial sign and its trademark in order to sell products and services. This

agreement generally includes technical assistance.

Subsequently, in a December 31, 1975 law, the French Government forbade the

use of foreign terms in the sale of goods and services in the French territory and as

a consequence translated “franchising” as “franchisage.” These two legal sources

have since been repealed. As of the date of this chapter, French statutes contain no

reference to franchises or franchising.

Despite this situation, one cannot assume that French law does not contain a

definition. Given the imbrication of French law within the European law legal cor-

pus, when referring to a French definition one can make reference to European law.

In this respect, the legal definition of a franchise is to be found in European case

law. On January 28, 1986, case n° 161/84, the European Court of Justice rendered

the landmark decision commonly referred to as the Pronuptia case.

This decision relates to the interpretation of Article 85(3) of the European Com-

munity Treaty to certain categories of exclusive dealing agreements. The Franchi-

see challenged the validity of the franchise agreement as being against European

Competition Law. The Court of Justice admitted the validity of the franchise agree-

ment and specified that the Franchisor must be in a position to protect certain inter-

ests vital to the business and to the identity of the network (know-how), if the provision

is essential for this purpose, despite the existence of certain anti-competitive traits to

the agreement.

The Court indicates in Section (13) of its decision that:

It should be pointed out first of all that franchise agreements, the legality of

which has not previously been put in issue before the court, are very diverse

in nature. It appears from what was said in argument before the court that a

distinction must be drawn between different varieties of franchise agree-

ments. In particular, it is necessary to distinguish between (i) service fran-

France 165

chises, under which the Franchisee offers a service under the business name

or symbol and sometimes the trademark of the Franchisor, in accordance

with the Franchisor’s instructions, (ii) production franchises, under which

the Franchisee manufactures products according to the instructions of the

Franchisor and sells them under the Franchisor’s trademark, and (iii) distri-

bution franchises, under which the Franchisee simply sells certain products

in a shop which bears the Franchisor’s business name or symbol. In this

judgment the court is concerned only with this third type of contract, to

which the questions asked by the national court expressly refer.

Subsequently to this landmark case, the Court of Justice rendered four addi-

tional decisions (Yves Rocher, December 17, 1986; Computerland, July 13, 1987;

Service Master, August 20,1988; and Charles Jourdan, December 2, 1988) on fran-

chising cases.

2. French Disclosure Law

In 1989, in the aftermath of the landmark Pronuptia case, the French parliament,

upon initiative of the government’s Minister for Commerce, François Doubin, grew

concerned about the asymmetrical relationship between brand owners, essentially

Franchisors and prospective Franchisees, not considered as consumers, with little

commercial experience. It decided to create a disclosure obligation that per se does

not mention franchising and does not limit itself to franchising but clearly applies to

franchise agreements.

The disclosure requirements are contained in Law Number 89-1008 of Decem-

ber 31, 1989, Relative to the Development of Commercial and Trade Enterprises

and the Improvement of Their Economic, Legal, and Social Environment. This law,

known as the “Loi Doubin,” is a mandatory pre-contract disclosure regime and was

integrated into the French commercial code as Article L. 330-3 and R 330-1. The

law came into effect at the time it was published on January 4, 1990, even though

the implementing decree specifying the information to be disclosed under the Loi

Doubin was adopted more than one year later (Decree Number 91-337 of April 4,

1991 (the Decree)). The Loi Doubin contains only one article, as follows (Article L.

330-3):

Any person who makes available a trade name, trademark or commercial

sign to another person, while requiring from such other person a commit-

ment of exclusivity or quasi-exclusivity for such other person’s activity shall,

before the signature of any contract concluded in the common interest of

the parties, provide such other person with a document containing truthful

information enabling such other person to enter into the contract in full

knowledge.

This document, the content of which is set by decree, must state, in

particular, the number of years and experience of the business, the current