Franchising in France - The Macron Law

We reported in April about the "Macron Bill" in France and its potential impact on the retail franchise sector (please click here for the previous blog). The "Macron Bill" has now become the "Macron We reported in April about the "Macron Bill" in France and its potential impact on the retail franchise sector (please click here for the previous blog). The "Macron Bill" has now become the "Macron Law" and the new provisions introduced will be applicable from 7 August 2016 onwards.

In respect of the anticipated amendments, the following made it into the Macron Law:

• Franchise agreements and all ancillary agreements are coterminous: the legislator wanted to avoid franchisees being tied by these ancillary agreements if the franchise agreement itself was terminated. As the Macron Law does not contain a definition of "ancillary agreements" some uncertainty remains as to what will be considered an "ancillary agreement", though supply agreements for goods that are sold or used in the franchised outlets will most certainly be considered as "ancillary".


• Post termination restrictions on competition are void – unless, they:
  - relate to goods or services which are the subject matter of the franchise agreement;
  - are limited to the premises from which the franchisee conducted its franchise business;
  - are essential for the protection of substantial, secret and specific know-how of the franchisor; and
  - do not exceed a period of one (1) year following termination or expiry of the franchise agreement.
  (If this sounds all too familiar, then this is no coincidence as the new provision closely mirrors the conditions that the Vertical Block Exemption Regulation (330/2010/EC) sets out for the enforceability of post-term non-compete provisions in vertical agreements).


 

The de-minimis threshold which was discussed during the earlier stages of the Macon Bill was removed which means that the Macron Law will apply to all franchise agreements irrespective of the size of the contracting parties.

Good news for franchisors and franchisees is however that following extensive lobbying by large retailers as well as the French Franchise Federation, the amendment, which tried to limit the term of franchise agreements to 9 years, did not make it into the Macron Law.

The legislator realized that a longer term does not necessarily have to be a negative and that there are a number of franchise systems which require a significant upfront investment which can take longer than 9 years to amortise.