Termination of Franchise Agreement

The franchise contract, a fixed-term contract, can end in two ways.

On the one hand, in the normal context of contractual relations, the franchise contract ends at the term defined by the parties in the contract.

If the contract stipulates that it will be renewed by tacit agreement at its end, the termination of the franchise contract is not automatic and a notice of termination of the contract, of a sufficiently long duration in view of the duration of the contractual relationship, must be respected by the party wishing to terminate the contractual relationship.

On the other hand, the contract may terminate, in an early manner, by its termination by one of the parties.

This assumption is often settled in the contract by an express termination clause defining the obligations of the parties whose non-performance or events whose occurrence justifies the termination of the contract as well as the terms of the termination (prior notice or not in particular), in application of this clause. These clauses are of strict interpretation. Also, the franchisor may not terminate the franchise agreement pursuant to the termination clause in the event of non-performance by the franchisee of one of its contractual obligations not expressly referred to in this clause. In the latter case, the termination of the contract by the franchisor can only be done by judicial means, on the basis of Article 1184 of the Civil Code.

In order to protect its network, based on its know-how and the image of its brand, the franchisor must ensure that the effects of the termination of the franchise agreement are contractualized.

Thus, the cessation of the use of know-how, the cessation of the use of distinctive signs, the return of furniture and fixtures as well as the fate of data from the software used by the franchisee during the execution of the franchise agreement must be contractually organized.

Incorporating a post-contractual non-competition or non-affiliation clause at the expense of the franchisee will allow the franchisor, at the end of the contract, to ensure the protection of its know-how.