In a decision handed down on December 4, the French Supreme Court (Cour de Cassation) upheld a franchisee’s prohibition on actively canvassing customers in a neighboring franchisee’s territory.
The case takes place in the fitness industry, a field where franchisees are sometimes as sporty as they are in their commercial deployment…
A franchisee notices the presence in his territory of billboards and flyers in letterboxes promoting the neighboring franchisee’s club. Determined not to let himself be invaded, the franchisee sued his neighbor for injunctive relief to stop the canvassing.
The Aix-en-Provence Court of Appeal however rejects the claim, ruling that the canvassing was not wrongful, as it was not targeted, nor individualized nor repeated at the franchisee’s customers in the territory concerned.
However, the Cour de Cassation (adopted a more detailed analysis and overturned the decision handed down by the Cour d’Appel, pointing out that the franchise contract required compliance with the network’s internal code of ethics, which meant that each franchisee had to respect the marketing territory allocated to him.
This ruling provides the perfect opportunity to reiterate a number of basic principles in this area:
– Franchise agreements do not always provide for territorial exclusivity for the franchisee;
– If an exclusive territory is granted, the franchisee is in principle required not to actively prospect outside this territory, and not to canvass customers in the territories of other franchisees;
– “Passive resales” remain authorized: the franchisee remains entitled to accept requests from customers located outside his zone, provided he has not taken any steps to this effect.