The French administration has criticized many imbalanced
provisions in fast food and theme catering franchise
Within the scope of its mission to control significant imbalance
between the rights and obligations of the parties in commercial
agreements, the French administration body in charge of consumer
and competition matters (the DGCCRF) carried out a sector inquiry
in the franchised fast food and theme catering sector and
controlled 12 franchise agreements. The DGCCRF reported it had
found many imbalanced provisions in favor of franchisors. The
DGCCRF issued five warnings and two summons, and two injunctions
are under process.
In the scope of this inquiry, the DGCCRF analyzed contractual
relations between 12 franchisors and franchisees. Many
breaches of provisions of the French Commercial Code on restrictive
practices (pratiques restrictives de concurrence) were
uncovered. Certain billing rules were found to be breached.
Furthermore, certain payment deadlines exceeded the maximum
provided under French law.
However, the DGCCRF seems to have focused particularly on
provisions that could create significant imbalance between the
rights and obligations of the parties to the franchise
Under Article L.442-6 of the French Commercial Code, it is
prohibited inter alia to impose a significant imbalance between the
rights and obligations of the parties to a commercial agreement or
commercial relationship in general. This prohibition is sanctioned
by damages. The French Ministry of Economy can also sue the
franchisor before French Commercial Courts and ask for the payment
of a civil fine up to 2 million euros or 5% of the French annual
turnover of the franchisor.
Article L.442-6 of the French Commercial Code is a mandatory
provision that can be applied by French courts to franchises in
France, even if the parties had decided that the contract is
governed by the law of another country.
The following provisions seem to be the most problematic
according to the DGCCRF.
Unjustified or disproportionate payment obligations
The DGCCRF observed in certain agreements that, while the
franchisee has to pay an advertising fee to promote the network,
the services rendered in this regard by the franchisor were not
Besides, certain franchise agreements provide for a renewal fee
that seems disproportionate, especially when it is identical to the
Other clauses creating significant imbalance
The DGCCRF also raised the issue of several clauses that could
create significant imbalance, such as:
clauses providing that only the
English version of the franchise agreement is binding;
clauses allowing the franchisor to
unilaterally modify the contract, or allowing the franchisor alone
to terminate the contract early;
clauses providing for the loss of the
entry fee by the franchisee if it does not pass the test during the
clauses allowing unlimited access by
the franchisor to the franchisee's electronic data;
disproportionate non-compete clauses
allowing the franchisor to conclude another franchise agreement
within the same territory.
Result of the inquiry
Following this inquiry, the DGCCRF initiated against franchisors
two contemplated legal actions, as well as two contemplated
injunctions to change the franchise agreements. Furthermore, the
DGCCRF warned five other franchisors not to include imbalanced
clauses in their franchise agreements.
It will be important to follow the results of the judicial
actions brought by the DGCCRF as they will give directions on which
provisions can create significant imbalance in franchise
However, these actions will take time and will not address all
problematic provisions. It is therefore strongly recommended
to anticipate the potential visit of the DGCCRF and review the
franchise agreements with French franchisees under this angle of
significant imbalance which the DGCCRF seems keen to
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