Assistance to the franchisee in finding premises and area reservation contract

The support provided by the franchisor who has undertaken an obligation to assist the franchisee in finding premises must be commensurate with their commitments.

In particular, when the parties involved have not signed a zone reservation contract .

This is one of the lessons that can be drawn from the judgment handed down by the Paris Court of Appeal on March 30, 2022.

In this case, under the terms of a pre-contractual information document (DIP) signed with two candidates, the franchisor undertook to assist the franchisee in setting up his restaurant and in choosing the location.

Two months after the signing of the Pre-contractual Information Document and on the recommendations of the Franchisor " in order to reserve the area and commit quickly to a location ", a franchise contract had been concluded between the parties.

This contract stipulated the payment of an entry fee (amounting to 50,000 euros) and the opening of the restaurant within six months of its signing.

However, this deadline was not met, as the franchisees were unable to obtain suitable premises, in particular due to a lack of financing from the banks, despite active efforts.

Blaming their failure on the franchisor's lack of assistance in finding locations and in supporting them with banks, the franchisees notified the franchisor in October 2017 of the termination of the contract and demanded, in vain, the reimbursement of the entry fee.

The Court of Appeal's ruling partially grants the franchisees' requests.

Noting the absence of a prior agreement for reserving areas, the Court considers that the fact that the contractual process did not provide for an intermediate phase of reserving areas allowing the candidate to carry out a market study before signing the franchise agreement , contributed to the failure to open the restaurant within the expected timeframe .

It therefore orders the franchisor to pay damages of 30,000 euros, and to pay 12,000 euros under Article 700 of the Code of Civil Procedure.

However, it also pronounces the termination of the franchise contract at the shared fault of the parties, the franchisees having terminated the contract without prior notice in order to move towards another project, while the franchisor was willing to conclude an amendment to extend the search period.

This decision highlights the judges' consideration of the following elements:

• The signing or not of a zone reservation contract , prior to the signing of the franchise contract, in the absence of a location already obtained by the franchisee;
• The effectiveness of the franchisor's support , which, when contractually committed to, can hardly be limited to a few "remote advice" or "visits" at the request of the franchisee;
• The promises contained in advertising materials can be taken into consideration by judges: in this case, the existence of a leaflet mentioning: preparation for the interview with banks, study of commercial leases and locations, landlord/transferor negotiations) was noted, the Court having held that these services had to be "up to the promises contained in the contractual and advertising documents".

Paris Court of Appeal, Division 5 – Chamber 4, March 30, 2022, No. 20/06507