In cooperation with Cerca, Cecile Peskine revisits, in an accessible way, the fundamentals of franchise law through videos.
“What legal provisions govern contracts at the national and international levels?
The franchise agreement is primarily governed by French regulations or those of the country in which the franchisor operates. Under French law, the Doubin Act (now codified in the Commercial Code) imposes a pre-contractual information obligation on the franchisor. In addition to this text, there are the general principles of contract law. Naturally, the franchisor is required to comply with European regulations that are directly applicable in member states. These regulations are not specific to franchise agreements. However, they do provide a framework for what are known as vertical relationships. Vertical relationships are those between a supplier and a distributor in a given market. In this case, we are required to comply with this basis of European law in addition to French rules. When a franchise network develops in a country other than its country of origin, it must take into account the national regulations of the country concerned. Here, we see differences between the various European countries in terms of franchise rules. France is a country that has opted for a pre-contractual information system, as is the case in Italy and Spain, for example. Some countries have made slightly different choices in this regard. It is always necessary to check the regulations of the destination country. It is not enough to assume that only French law applies. We will therefore check the local public policy regulations.
Let me give you a very concrete example. South Korea has a number of restrictions in place, including a cap on royalties based on the sector of activity. Even if the franchise agreement is subject to French law, it is essential to check that it does not exceed the maximum amount of royalties set by Korean regulations. It is often said that it is necessary to carry out a “sanity check” of the mandatory rules applicable in a given country that will impact the franchise agreement.”