This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

In accordance with the principle of privity of contract, the customers of the franchisee, an independent trader, cannot in principle bring an action against the franchisor. Thus, failing any mandate, the franchisor cannot be ordered to pay the balance of orders owed by its franchisees . Based on the “apparent agency” theory, the Court of Cassation has however upheld as admissible a nullity action  …

Franchise and mandate.

The franchisee must not be subordinate to the franchisor  otherwise his franchise agreement must be re-characterized as an employment contract . The assessment of the existence of subordination is made in concreto, the courts being rather restrictive in their assessment . Evidence must be brought that the franchisee is deprived of autonomy in the definition of his commercial policy, particularly because he is not free to fix the sales prices to the public . A franchise will be re-characterized as an employment contract where the franchisee, registered with the Trade Registry, operates its business through a service organized according to the directives and under the strict control of the franchisor with an imposed remuneration , where the “franchisor” organizes the tasks of the “franchisee”, sets price lists and determines the labor conditions, by applying disciplinary sanctions in case of breach of the contractual obligations , or where the instructions given by a company to an individual contribute to the organization of his work, in particular (in the case of a package delivery contract) by the preparation of his rounds and the definition of the logistic service and his routes, where the contracts are directly entered into with third parties, without intervention of the employee . The reclassification can also come about at the entry stage when an applicant to the franchise in the integration period carries out work in a relationship of subordination with regard to the grouping notwithstanding the entrepreneurial nature of the application . However, where the intervention of the franchisor in the franchisee's management does not exceed the usual involvement in compliance with his obligations towards the clientele, the protection of his image and the promotion of their joint success, it does not characterize a relationship of legal subordination . A reclassification of the contract is also not available where despite significant constraints in the management of the business, the franchisee is not subject to the disciplinary authority of the franchisor even if the latter may terminate the agreement for non-performance of contractual obligations . Likewise, the requirement that the franchisee remain within the contractual territory or work in synergy with other network members does not reflect the existence of relationship of subordination making it possible to reclassify it as an employment contract . The franchisee, who is able to set his own prices, is completely independent in terms of recruitment, dismissals and the management of staff and fixes its opening and closing times, is not in a relationship of subordination characteristic of an employment contract either . Lastly, even in the presence of “extremely meticulous” directives or particularly meticulous supervision of the franchisee's activity, the franchisee cannot demand that he be reclassified as an employee, since this control does not emanate from the franchisor himself, but from a company that is legally distinct from him, to which the operational force of the franchise audit has been entrusted .

A reclassification, when justified, notably lays the alleged franchisor open to the payment of a fixed indemnity for concealed employment, to the compensation of the employee's loss related to its absence of membership with social organizations and the repayment of the entry fee . A minority partner in the franchised undertaking is not entitled to demand the reclassification of the contract as an employment contract .

In addition to disputes concerning reclassification as employment contracts, labor law is often invoked in matters relating to claims that the contracts of dismissed employees of franchisees should be taken on by other members of the network  or that the franchisor is the co-employer of the franchisee's employees . The courts, like for other types of cooperation, thankfully only find in a very limited manner that franchisors may be classified as co-employers.

The Law of 8 August 2016 ("Loi Travail")  created a new constraint for franchise networks with at least three hundred employees by requiring the creation of a “social dialogue” committee common to the whole of the network, i.e. a real works council for networks. Criticized by legal commentators and practitioners alike due to the relationship of subordination it created between franchisor and franchisee contrary to the spirit of the franchise, and the establishment of a second layer of legal protection for franchisees' employees, who were already covered by employment law, the obligation was repealed by Law No 2018-217 of 29 March 2018 .

CA Rennes, 14 February 1996, LawLex200200004950JBJ; CA Bordeaux, 17 April 1991, LawLex200200006160JBJ; Cass. soc., 22 March 2007, LawLex200700001115JBJ.

Cass. com., 18 July 2001, LawLex200200004363JBJ: a franchise contract must be re-characterized into an employment contract where it is established by various indices that the franchisee is placed under the franchisor's subordination; CA Grenoble, 1 September 2003, LawLex200300003528JBJ; CA Toulouse, 13 October 2006 LawLex200800000398JBJ.

CA Aix-en-Provence, 10 March 2015, LawLex201500000329JBJ.

CA Metz, 5 June 2019, LawLex201900000771JBJ. See also CA Montpellier, 9 February 2022, LawLex202200001003JBJ.

CA Rennes, 23 May 2024, LawLex202400003987JBJ.

Cass. soc., 10 February 2010, LawLex201000000225JBJ.

CA Paris, 18 June 2013, LawLex201300001009JBJ.

Cass. soc., 20 February 2008, No 06-45-335; CA Toulouse,, 9 October 2015, RG 13/05919; CA Montpellier, 17 September 2014, No 13/02988, No 13/02991, No 13-02989; but see CA Lyon, 7 November 2014, No 12-03940: ruling out a claim for reclassification within the purchasing cooperative as it did not not carry out the same activity as stores.

Cass. soc., 9 June 2015, No 13-26.558 to 566: “The fact that an identical executive team identical has been set up[for the franchised companies at issue] and that [the franchisor] has on the one hand, taken in the context of the policy of the group decisions affecting the fate of its subsidiaries, and on the other hand, provided the means necessary for the implementation of the cessation of activity of [those] companies, was not capable of constituting a situation of co-employment”.

Article 64 of Law No 2016-1088 of 8 August 2016 on work, the modernization of social dialogue and the securing of professional processes , OJ, 9 August 2016.

Article 7 of Law No 2018-217 of 29 March 2018, OJ, 31 March 2018.

CA Bordeaux, 18 September 2000, LawLex200200004938JBJ; Cass. soc., 22 March 2007, LawLex200700001115JBJ: the subordination link which must be justified to re-characterize a franchise contract into an employment contract must be characterized not only during the formation of the contract, but throughout its performance.

CA Paris, 19 November 1997, LawLex200200005067JBJ; CA Douai, 23 November 2006, LawLex200800000394JBJ; Cass. soc., 26 September 2007, LawLex200800000034JBJ and LawLex200800000438JBJ.

CA Montpellier, 6 January 1999, LawLex200200005165JBJ; Cass. soc., 18 January 2012, LawLex201200000145JBJ,

CA Bordeaux, 7 October 2008, LawLex201000000242JBJ.

CA Paris, 6 November 2008, LawLex200900001751JBJ.

CA Paris, 30 September 2010, LawLex201100000998JBJ.

Cass. com., 23 September 2014, LawLex201400000975JBJ; see also CA Paris, 18 May 2016, LawLex201600001111JBJ; 16 May 2018, LawLex201800000731JBJ; CA Limoges, 3 February 2020, LawLex202000000213JBJ.

CA Rouen, 20 September 2015, LawLex201500001185JBJ.

Franchise and employment contract.

The franchisee must be classified as a salaried manager when it is dependent on the supplier within the meaning of Article L. 7321-2 of the Labor Code. This provision makes the salaried manager status subject to four conditions being met: the manager must be exclusively supplied by its contracting party, in premises approved by it, at prices and under conditions imposed by it. These conditions are cumulative  and exhaustive: the absence of subordination, within the legal meaning of the term, does not prevent a classification of salaried manager insofar as the application of the provision is not subject to the existence of an employment contract . Likewise, it is not necessary that working, hygiene and safety conditions have been fixed by and subject to the approval of the so-called franchisor , or that the application of labor law is requested by an individual and not a legal entity, since this is not a question of characterizing the employment contract relationship . The court must concretely verify that the conditions of Article L. 7321-2 of the Labor Code are met and not merely apply the terms of the contract .

Where the franchisees are subject to an obligation of exclusive purchase and operate from premises approved by their supplier who imposes on them the operating conditions of the business and unilaterally fixes the price for the goods of which it remains the owner until the sale, the franchise agreement must be re-characterized as salaried management . The exclusivity condition is not met where the franchisee retains the possibility of obtaining supplies independently from legal entities that are distinct from the franchisor  or is only required to obtain supplies principally from the supplier  unless that possibility is only theoretical . Similarly an exclusive or quasi-exclusive purchase deal must relate to the products sold and not to an aspect of the service rendered included in the final price of the service carried out by the latter . The Court of Appeal in Pau even required the franchisee to show that the company supplying it, exclusively or almost exclusively, was part of the supplier's group . However, this appears to add a condition that is not present in the provision.

 For a re-classification, the premises must not have been given in lease management by a third party  but, for example, be rented in the name of the supposed franchisor , be supplied  or at least be tacitly approved  by the latter. The approval may also be inferred from the fact that the contract is made specifically for the point of sale in question, without the possibility of transferring the activity to another site except with the express consent of the franchisor, which requires the obligation to comply with precise specifications as to the layout .

 Furthermore, the supposed franchisee will not be free to fix his own prices  or to determine commercial policy . Pre-pricing the contract goods and the fact that it is impossible to unilaterally modify the cash register software is sufficient to establish resale price maintenance  and to reclassify the contract. In addition, compliance of the pricing practices of the so-called franchisor with the vertical restraints regulation does not affect the applicability of Article L. 7321-2 of the Labor Code . On the other hand, the discretion left to a franchisee to modify recommended prices within the range of the brand's particular specific positioning  - in particular to adapt it to the margin he wishes to generate or to the local competition  -, the imposing of a ceiling price  or price recommendations devoid of any binding character, which have no other purpose than to allow the franchisee to achieve a financial balance, do not amount to the imposition of the retail price . Similarly, a franchisee who is not required to comply with promotional offers, which in any case state that they apply only in the restaurants participating in the operation even though prices may vary depending on the restaurants, cannot rely on Article L. 7321-2 of the Labor Code .

In addition, an obligation to return stock and a non-compete obligation, as well as the prohibition from modifying the nature of the business and from closing it for more than one month in addition to weekly closings have not been held incompatible with the exercise of an independent activity by the franchisee . The provisions of the operational handbook provided to the franchisee, which set a minimum number of weekly opening hours, which are modifiable after approval by the development officer, and which do not impose opening and closing hours or days, do not constitute an imposition of operating conditions specific to branch management . The same goes for restrictions relating to dress  or the obligation to use the same background music imposed by the franchisor, which are related to the identification of the brand and do not violate the commercial autonomy of the franchisee when they remain proportionate to the objectives pursued .

The particular status of the salaried manager grants the franchisee social protection in his relations with the supplier in order to offset the situation of dependence without resulting in the re-classification of the relations as an employment contract. In case of re-classification, the salaried manager may claim back pay  - his remuneration cannot be lower than the minimum wage (SMIC)  - as well as the benefit of the collective bargaining agreement (convention collective) to which the entrepreneur who hires him is subject . Likewise, he may obtain the repayment of the “entry fee” if it deprives him of   The Labor Court has jurisdiction to hear cases relating to terminations where the performance of franchise agreements meet the conditions of Article L. 7321-2 of the Labor Code . However, the application of  Article L. 7321-2 does not alter the commercial nature of the agreement and does not give rise to any right to recoup the costs of entry or other costs borne by the franchisee on joining the network  as long as the entry fee does not deprive him of his right to the minimum wage . Likewise, the reclassification of the franchisee as a salaried manager does not have the effect of erasing its commercial debts in respect of the franchisor .

CA Nancy, 21 October 1998, LawLex200200004870JBJ; CA Orléans, 1 July 1999, LawLex200200004668JBJ; Cass. soc. 11 October 2000, LawLex200200004869JBJ; CA Bordeaux, 18 March 2014, LawLex201400001782JBJ; CA Limoges, 3 February 2020, LawLex202000000213JBJ.

Cass. soc., 4 December 2001, LawLex200200004681JBJ and LawLex200200004715JBJ; 21 February 2007, LawLex200700000569JBJ; 16 September 2009, LawLex200900003093JBJ; CA Nîmes, 20 December 2002, LawLex200300000717JBJ; CA Paris, 13 January 2004, LawLex200400000584JBJ.

CA Pau, 26 November 2015, 2001500001673JBJ.

CA Douai, 29 June 2006, LawLex200700002014JBJ. Cf. CA Rouen, 20 September 2015, LawLex201500001185JBJ : premises provided by the co-contracter in the framework of a lease-mangement agreement, even if the latter is not the owner but only the holder of the right to the lease.

CA Aix-en-Provence, 4 October 2007, LawLex201000000031JBJ.

CA Nîmes, 13 December 2006, LawLex200800000396JBJ; but see CA Angers, 6 November 2012, LawLex201200002326JBJ: premises not provided but subject to a certificate of conformity.

Cass. com., 16 September 2015, LawLex201500001119JBJ.

CA Paris, 18 May 2016, LawLex201600001111JBJ.

CA Nîmes, 13 December 2006, LawLex200800000396JBJ; CA Aix-en-Provence, 4 October 2007, LawLex201000000031JBJ; Cf. CA Douai, 5 December 1991, LawLex200200005879JBJ: the classification of salaried manager is excluded where the franchisee remains free to fix his prices and to manage his store as an independent trader; see also CA Paris, 4 June 2014, LawLex201400000738JBJ.

Cass. com., 3 May 1995, LawLex200200004350JBJ; Cons. prud'h., Avignon, 5 May 1999, LawLex200200004952JBJ; CA Nîmes, 13 December 2006, LawLex200800000396JBJ.

CA Angers, 6 November 2012, LawLex201200002326JBJ.

Cass. com., 16 September 2015, LawLex201500001119JBJ, cited aboved.

Cass. soc., 16 September 2009, LawLex200900003093JBJ.

CA Limoges, 30 November 2020, LawLex202000003567JBJ.

CA Limoges, 3 February 2020, LawLex202000000213JBJ.

CA Metz, 5 June 2019, LawLex201900000771JBJ.

Cass. soc., 27 September 1989, LawLex200200005757JBJ.

CA Metz, 5 June 2019, LawLex201900000771JBJ. Also see CA Limoges, 30 November 2020, LawLex202000003567JBJ.

CA Pau, 26 November 2015, cited above, which also specifies that monitoring  compliance with standards in terms of hygiene and safety without extending it to the management of  staff or opening hours cannot lead to the reclassification as a salaried management; CA Metz, 5 June 2019, LawLex201900000771JBJ: the restrictions imposed on the franchisee regarding the wearing of uniforms, wall displays and the names of the products used fall within the scope of brand identification and do not affect the franchisee's autonomy in the operation and management of the business as long as they remain proportionate to the objectives pursued. 

CA Lyon, 13 March 2009, LawLex200900001626JBJ.

Cass. soc., 25 February 1998, LawLex200200005106JBJ.

Cass. soc., 21 February 2007, LawLex200700000569JBJ, quashing on this issue CA Toulouse, 9 September 2005, LawLex200700000818JBJ.

Cass. soc., 25 March 2009, LawLex200900001187JBJ.

Cass. soc., 12 February 2014, LawLex201400000301JBJ.

Cass. soc., 25 February 1998, LawLex200200005106JBJ, quashing on this issue CA Grenoble, 28 June 1995, LawLex200200005477JBJ. See also CA Lyon, 13 March 2009, LawLex200900001626JBJ.

Cass. com., 4 May 2017, LawLex201700000807JBJ; CA Bordeaux, 5 September 2017, LawLex201700001389JBJ.

Cass. soc., 18 April 2008, LawLex200900001599JBJ; 25 March 2009, LawLex200900001187JBJ.

Cass. com., 3 May 1995, LawLex200200004350JBJ; Cass. soc., 8 February 2005, LawLex200600000750JBJ; Cass. soc., 8 February 2005, LawLex200600000750JBJ; Cass. soc., 9 March 2011, LawLex201100000668JBJ; CA Bordeaux, 18 March 2014, LawLex201400001782JBJ.

Cass. soc., 11 October 2000, LawLex200200004869JBJ; CA Metz, 5 June 2019, LawLex201900000771JBJ; CA Limoges, 3 February 2020, LawLex202000000205JBJ.

CA Douai, 29 June 2006, LawLex200700002014JBJ.

CA Orléans, 5 July 2012, LawLex201200001991JBJ; CA Rouen, 20 September 2015, LawLex201500001185JBJ.

CA Paris, 6 June 2014, LawLex201400000738JBJ.

Franchise and salaried management.

In accordance with the principle of privity of contract, the customers of the franchisee, an independent trader, cannot in principle bring an action against the franchisor. Thus, failing any mandate, the franchisor cannot be ordered to pay the balance of orders owed by its franchisees . Based on the “apparent agency” theory, the Court of Cassation has however upheld as admissible a nullity action brought by a consumer against the franchisor in the context of a contract entered into with the franchisee . In this case, the multiple references to the franchisor in the contract documents had resulted in the legitimate belief by the consumer of the status as contracting party of that franchisor. The same solution has also been retained where the franchisor has deliberately led others to believe that it was the consumers' contracting party  or where the circumstances have created such a situation .

To avoid such confusions, EEC Regulation No 4087/88 of 30 November 1988 required the franchisee to mention its capacity as independent trader in the contract or advertising documents. Neither Regulation No 330/2010 , nor its guidelines , mention that issue. Under French law, the provision of information to consumer is regulated by the order of 21 February 1991, codified in Article L. 441-1 of the Commercial Code , whose conditions of application were specified in a DGCCRF memorandum of 21 May 1991.

Case law re-classifies the franchise contract as a mandate where the essential characteristics of the franchise contract are not met .

CA Rennes, 18 October 2002, LawLex200300002161JBJ.

Cass. com., 17 October 1995, LawLex200200004348JBJ.

TGI Valenciennes, 3 November 1993, LawLex200200005343JBJ.

CA Nîmes, 30 January 1995, LawLex200200005441JBJ upheld by Cass. 1re civ., 13 May 1997, LawLex200200005665JBJ.

Regulation No 330/2010/EU of 20 April 2010, on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, OJEU L 102 of 23 April 2010, 1.

Commission Notice No 2002/C 122/01 of 13 October 2000, LawLex200200000005JBA, pt 200 et seq. and current Guidelines on Vertical Restraints, par. 189 et seq.

According to that provision: "Any seller of products or any service provider bound to a franchisor by a franchise agreement, shall inform consumers of its status as independent undertaking in a legible and visible way, on all the information documents, in particular of an advertising nature, and inside and outside the sales outlets".

CA Paris, 1 March 2002, LawLex200300003153JBJ: the characterization as franchising must be dismissed where the contract does not provide for any availability of know-how and exclusively refers to a mandate, exclusive of any independence.

French Distribution Law

358. Franchise and mandate.

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358. Franchise and mandate.

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Les décisions de justice citées dans ce paragraphe :

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