On March 19, 2025, the Cour de Cassation (French Supreme Court) issued a ruling on whether the franchisee’s performance of preparatory acts during the term of the agreement constituted a breach of the non-competition, loyalty and good faith clauses contained in the franchise agreement, liable to result in the termination of the agreement to the detriment of the franchisee.
In this case, the franchisee operated several establishments under different banners belonging to the same group in the personal services sector.
In 2020, the two network heads notified the franchisee of the termination of his franchise agreement for serious misconduct on the part of the franchisee in breach of the non-competition, loyalty and good faith obligations set out in the franchise agreement.
The franchisor accused the franchisee of having:
– set up several companies;
– registered various trademarks;
– informed his customers by e-mail and publications on social networks;
– developed plans for a business competing with that of the franchisor;
The franchisor considered that such actions were contrary to compliance with the non-competition clause and to the good faith and loyalty due under the franchise agreement, and notified the franchisee of the termination of the franchise agreement between them.
The Cour de Cassation, in line with the decision of the Paris Court of Appeal, explicitly held that “the franchisee may, without violating the non-competition clause stipulated in the franchise agreement or the contractual obligations of loyalty and good faith, perform acts preparatory to an activity competing with that of the franchisor, provided that this activity does not actually begin until after the expiry of the franchise agreement and its non-competition undertaking”.