Dispute between a franchisee and his franchisor in the context of a network offering insulation services for private individuals. Ironically, the franchisee accused his franchisor of leaks in the territorial coverage guaranteed by the franchisor.
Franchisee claimed that the territorial exclusivity had not been respected: one of the network’s agencies opened in its exclusive zone, and another agency (located in another territory) had canvassed customers and taken orders in its exclusive zone.
However, the judges at the Agen Court of Appeal did not see it that way, and rejected the franchisee’s claim:
- The establishment of a branch in the franchisee’s exclusive territory had not been demonstrated by the documents submitted to the court. According to the Court, if the franchisor’s website did indeed indicate that another branch was located in a town within the franchisee’s exclusive zone, this was probably due to a “computer error” (sic!).
- The franchisor’s alleged failings with regard to canvassing and order-taking by another agency in the franchisee’s exclusive territory were only occasional and for “very marginal” amounts, and could not have had a significant impact on the franchisee’s business, whose sales and profits had increased during the term of the franchise agreement.
The judges also noted that the franchisor had acknowledged these shortcomings and granted the franchisee, by way of compensation, a 20% discount on his next order of insulation materials.
In this context, the Court ruled that the franchisor’s failings, having given rise to compensation, could not justify termination of the franchise agreement to the franchisor’s detriment (Agen Court of Appeal, November 23, 2022 – no. 21/00647).
