Local Market

Status

The local market report is a document that must be provided with the pre-contractual information document (PID) provided for in Article L. 330-3 of the Commercial Code. Remember that this document must be provided twenty days before the signing of any contract that provides for the provision of a trademark in return for an exclusivity or quasi-exclusivity commitment.

Market status should not be confused with market research.

While the state of the market consists of a simple collection of raw and objective data relating to supply and demand, market research involves an analysis of this data and a confrontation between this same supply and this same demand. Providing a market report therefore consists of transmitting to your franchisees a collection of economic data concerning the relevant market. The state of the market must “give the franchisee an accurate picture of the environment, which is decisive for his consent” (CA Paris, 13 June 2006, Euromark). From the case law definition of the state of the market, case law has been able to deduce that it is the responsibility of the franchisee to carry out or have carried out the market research. The fact of voluntarily providing the candidate with a market study, and not a state, may  engage the responsibility of the franchisor. Indeed, as soon as this information is provided, it must present the market in a sincere manner.

With regard to the geographical extent of the local state, again the text does not provide any details. Jurisprudence has not ruled on this issue either. Decisions that address the market issue either refer to the catchment area or use a geographical reference (the city, the contractual exclusivity area). The assessment must be made on a case-by-case basis.

Finally, with regard to the nature of the information to be provided, it is accepted that four categories of information must be transmitted to the franchisee in a market state, both general and local, namely, demand, supply, prospects of market developments and finally the mentions of date and source of the information transmitted.

The level of detail of the data provided may, if necessary, be adapted according to the person of the (future) franchisee.

In any case, it will be necessary to ensure that the information provided meets the objective of sincerity of the provision of the Commercial Code, allowing the candidate to make an informed commitment.