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Franchising in France - new bill may impact retail franchising sector

At the beginning of the year, we reported on some legal developments in the US which pose a threat to the franchising sector (click here for more detail). Unfortunately, it appears that the French At the beginning of the year, we reported on some legal developments in the US which pose a threat to the franchising sector (click here for more detail). Unfortunately, it appears that the French legislature is following suit with the adoption of a new bill on growth and business, known as the "Macron Bill", which contains a number of surprising last minute amendments which pose a threat to the retail franchising sector in France.

What?

Franchising is not specifically mentioned in the Macron Bill, but the Macron Bill's application to retail distribution networks undoubtedly covers retail franchising. The amendments include:

  • franchise agreements and all ancillary agreements (such as product supply agreements) should be coterminous.

  • post termination restrictions on non-competition are void.

  • the franchise term should not exceed 9 years. The parties should expressly agree renewal terms beyond that point and enter into a new agreement.

  • there will be a "de-minimus" threshold, whereby businesses with a turnover below a certain threshold (expected to be around 50m Euros) will be exempt from these changes.


Why?

The rationale behind these amendments to the Macron Bill stems from a recent investigation by France's competition authority in the food retail sector, which concluded that franchisees/distributors were locked into their relationships with certain brands for a long period of time and this in turn prevented the entry of new operators into the market.

What's next?

The French Franchising Federation (supported by franchisors/operators of distribution networks) is lobbying the French government over the potentially adverse consequences of some of the amendments, in particular the ban on post termination non-competition restrictions which are typically seen as necessary to protect a franchisor's know how.

The Macron Bill is not yet law - it must be approved by the Senate and then by the National Assembly, so hopefully there is time for the bill's opponents to exert influence and introduce some much need clarity on the role and scope of these provisions - watch this space.

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