Many networks choose to expand through brand licensing agreements. Thinking this would be appropriate : this model is often presented as less restrictive and heavy than franchising, and therefore better suited to rapid deployment without too many constraints… But this is not always the case.
Judges are not bound by the qualification given to the contract by the parties. When a dispute arises, the courts examine the reality of the relationship… If it has been suggested that know-how will be passed on, if the licensee has been provided with training, and if the licensee’s obligations go beyond simply respecting the brand, the license agreement is reclassified as a franchise.
In a ruling handed down on May 6, 2025 the Toulouse Court of Appeal reiterated these principles.
In this case, a brand licensing contract had been signed for a corporate governance consulting business. The head of the network boasted know-how, provided training and offered assistance during the term of the contract.
After reclassifying the brand licensing contract as a franchise, the judges declared it null and void, insofar as no pre-contractual information document had been provided prior to signature.
The consequences are not insignificant for the company, which is ordered to reimburse all sums paid under the brand licensing contract, and is exposed to the same consequences for all licensees under contract.
This is a reminder that it is preferable to delay the launch of a franchise, rather than start up under a trademark license, which would be subject to requalification.
To find out more about the distinction between trademark licensing and franchising, click here