Force majeure and insecurity in the franchisee's location area

The known insecurity of the area of ​​establishment does not constitute an unforeseeable or inevitable circumstance.

Court of Appeal of Montpellier, Commercial Chamber, October 26, 2021, No. 19/02199, SARL RACINE DISTRIBUTION v. Société CASH EXPRESS GROUPE

In a ruling dated October 26, 2021, the Court of Appeal of Montpellier sheds light on the circumstances which allow – or do not allow – a franchisee to terminate the franchise contract on the basis of a case of force majeure.

In this case, two months after his initial contract was renewed for a period of 7 years, a franchisee unilaterally terminated the contract binding him to his franchisor without respecting the contractual notice period.

Citing the numerous thefts he had suffered, as well as a continuous decline in turnover, the franchisee had ended the operation of the point of sale, considering that these circumstances constituted a case of force majeure making it impossible to operate the point of sale smoothly.

Convicted in the first instance for wrongful termination of the contract, the franchisee appealed the decision of the Commercial Court of Perpignan, recalling that he had filed six complaints for thefts perpetrated in his store, insecurity which constituted a case of force majeure as well as an "external cause" which would have released him from the obligation to respect the contractual notice period.

The franchisor was also accused of disinterest and a lack of assistance towards the franchisee, the brand having, according to the franchisee, "refused any adaptation of the concept to his particular situation" (such as the possibility of offering payment facilities to his customers)

However, this argument was not accepted by the Court of Appeal of Montpellier, which dismissed all of the franchisee's claims.

According to the judges, "the operating context of the store, admittedly difficult", did not constitute a case of force majeure because in 2012, at the time of the renewal of the contract, it was "neither unforeseeable nor impossible to avoid".

The magistrates noted in particular that the franchisee, who had chosen this location to establish himself there, had remained there despite the numerous press articles published since 2009 and even after the area was classified as a priority security zone in 2013, then as a priority neighborhood in 2015

Considering further that the franchisee did not provide proof of the franchisor's disinterest and of the latter's violation of its obligation of permanent assistance, the Court of Appeal upheld the first instance decision by ordering the franchisee to pay more than €10,000 in royalties, and a termination indemnity in compensation for the loss suffered by the franchisor corresponding to 12 months of royalties, in accordance with the stipulations of the franchise agreement.