Customer files and franchising: shared or exclusive custody at the end of the contract? Cour de Cassation, Chambre commerciale, September 27th, 2023, n°22-19.436)

Avocats, Conseils en réseaux

The French Supreme Court recently heard a case involving several former franchisees of a ready-to-wear clothing network to their franchisor. After the termination of theirs agreements, the network head had failed to provide them with an extraction of their customer file, leading a group of franchisees to take their grievances to court.

It is important to note first of all that the concerned action was a “référé” claim: the judges were not called upon to rule on the merits, but on the existence of a “manifestly unlawful disturbance” or the threat of “imminent damage” justifying the summary proceedings judge taking precautionary or restoration measures.

Two key issues were addressed in this case:

1.Is the franchisor obliged to provide former franchisees at the end of the contract with an extraction of their customer file?

Affirmative: the franchisor was condemned in this respect. In fact, the franchisor himself had decided to transfer their customer files to former franchisees without waiting for the Court ruling.

For two reasons:

– Firstly, it is useful to remember that the franchisee is an independent trader, owner of a business to which a customer base is attached. The clientele is thus both “national”, attached to the brand, and local, attached to the business (a principle established by a Court of Cassation ruling of March 27, 2022, no. 00-20.732).
– Secondly, the franchise agreement expressly provided that the franchisee was the owner of its customer database.

2.Can the franchisor continue to use the customer file data collected by former franchisees after the end of the contract?

Negative in the concerned case: the franchise agreement provided for the franchisor to manage the customer file, as well as a right of first refusal in the event of transfer of the customer file. From this, it could be deduced that the franchisor would have to pay cash if he wished to appropriate franchisees’ customer files. Moreover, the contract did not provide a right for the franchisor to continue using the file at the end of the contract.

What happens if the contract expressly provides for such an option? The question remains unsolved. The concerned ruling does not go into the merits of the case, and another ruling – also handed down in “référé” proceedings – held that the clause allowing the franchisor to continue using the customer file was likely to result in a misappropriation of customers and be tainted by a “significant imbalance” (Paris Court of Appeal, no. 13/04683). Does this mean that such a clause is systematically null and void? Doubt remains in the absence of a decision on the merits in this respect.

What conclusions can be drawn?

– Franchisees must be able to access their customer files at any time – including at the termination / expiration of the contract; technically, it is therefore necessary to be able to isolate the customers data stored by each franchisee, so as to enable them to carry out such extraction if they so wish. Even at the end of the contract, and even if the franchisee is subject to a post-contractual non-compete obligation.

– In terms of regulations relating to the processing of personal data (arising essentially from the “GDPR”), it is useful to organize aspects of the relationship between franchisor and franchisee, by means of a dedicated appendix to the franchise agreement.

Avocats, Conseils en réseaux

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