The ruling handed down by the Paris Court of Appeal on September 24, 2025 (No. 23/19339) provides several fundamental insights into the changes that the franchisor can and must make to the know-how.
The evolving nature of know-how and preservation of the initial concept: a difficult balance
In 2015, the franchisee joined the new “Boco” franchise network, which was based on a clear promise: “bistronomic” dishes created by Michelin-starred chefs, served exclusively in returnable glass jars, with a focus on locally sourced organic products.
In 2018, the franchisee’s business suffered massive losses, leading to the liquidation of the franchise company.
The manager of the franchise company and his holding company then sued the franchisor, denouncing several failures on the part of the franchisor. In particular, they accused the franchisor of imposing radical changes during the course of the franchise to compensate for the failure of the initial model, leaving the franchisees to test the relevance and effectiveness of the new methods themselves, at their own expense.
In this regard, the Court of Appeals reaffirmed that know-how is not set in stone. It must be able to evolve in order to remain useful and specific in the face of market fluctuations. The franchisor not only has the right, but also the obligation to strive to find
In this case, the Court of Appeals found that, under the guise of evolution, the franchisor had made changes that rendered the initial concept meaningless, in particular:
- By replacing glass with plastic containers, the franchisor went so far as to admit in an email that “Boco’s uniqueness no longer lies in the container.”
- By gradually abandoning organic products and recipes created by chefs in favor of frozen products and the introduction of classic sandwiches.
- By eliminating the local character of the offering.
Thus, by the extent of these changes, the franchisor rendered the initial concept unrecognizable, thereby crossing a line set by case law.
However, the Court reaffirms an important point: the mere failure of the franchise, as evidenced by the disappearance of the network and the franchisor’s bankruptcy, is not in itself proof of the non-existence of know-how at the time the franchise agreement was concluded. In other words, the fact that the franchisor experienced difficulties leading to its bankruptcy does not establish that no know-how was transferred.
The characterization of this fault calls for some reservations: the ruling is based on specific factual and procedural circumstances, marked in particular by the overall collapse of the Boco network.
The accumulation of factual elements and failures raised by the plaintiffs thus tends to make this decision a case-specific ruling, as is often the case in franchise matters, rather than a tightening of the conditions for the implementation of know-how development with regard to the franchisor.
It should be noted in particular that the franchisor did not submit the know-how manual to the court, which would have enabled the judges to assess its consistency, and that it was also in breach of its obligation to provide ongoing assistance.
However, this decision clearly illustrates the delicate balance between the franchisor’s obligation to develop its know-how—particularly in light of market fluctuations—and the need to preserve the spirit and substance of the initial concept, a balance that is once again being put to the test here.
It is also important to remember the very origin of know-how, which is an asset of the franchisor, to be developed and tested by the latter before being disseminated to franchisees (even during the term of the franchise agreement), and not the other way around.
A not very profitable recipe?
Beyond the distortion of the concept, the franchisor’s liability is engaged in the area of profitability.
The Pre-Contractual Information Document (DIP) provided contained sales forecasts, and the franchisor had also validated the franchisee’s forecast.
In addition, all of the franchisees had ceased operations between three months and two and a half years after starting up.
The Court thus found that the plaintiffs “could not, based on the information provided by the franchisee and the information they themselves had gathered by conducting their own market research, identify the risk of such a massive and rapid failure.”
Therefore, by providing erroneous objectives based on the transmission of “incomplete and untested know-how,” the franchisor misled the partners about the substantial profitability of the business, thereby vitiating their consent.
However, this was an opportunity for the Court to reiterate certain key principles:
– The law does not require the franchisor to provide the franchisee with a market study or projected accounts (in this regard, Com., October 18, 2023, No. 22-19.329, which nevertheless specifies that, if such a study is provided spontaneously, the presentation of the market must be sincere).
– Any shortcomings or deficiencies in the DIP do not in themselves render the contract null and void, as the franchisee must qualify and characterize the resulting defect in consent (in this sense, Com. February 10, 1998, No. 95-21.906, and Com., October 7, 2014, No. 13-23.119).
In this case, the franchisor had expressed certain reservations about the premises chosen by the franchisee, but had not raised any other complaints about the franchisee’s compliance with the concept.
Procedural issues
The ruling is also significant in terms of the procedural issues it raises, particularly with regard to the admissibility of actions brought by third parties to the contract.
While the Court of Appeal confirmed that the manager and the associated holding company, although third parties to the franchise agreement, were entitled to bring an action on the basis of non-contractual liability, it set a strict limit on the loss of capital contributions.
The Court of Appeal points out that the loss of contributions does not constitute a separate loss from that suffered by the community of creditors of the franchised company in liquidation.
Consequently, only the representative or the liquidator has the authority to act on behalf of this group. The partners cannot therefore individually seek compensation for damage that is indistinguishable from the insufficiency of the legal entity’s assets.
On the franchisor’s side, the ruling takes a particular position, since the franchisor’s legal entity is not the only company involved in the case and found liable: SARL BOCO, which was not a signatory to the franchise agreement, is also found liable.
What lessons can be learned from this?
– The franchisor must develop its know-how while preserving the DNA of the concept.
– The franchisee’s business plan does not have to be validated by the franchisor.
The franchisor must be able to demonstrate that it is fulfilling its obligation to provide ongoing assistance.