Non-affiliation clause

Unlike the non-compete clause, the post-contractual non-affiliation clause does not prohibit the franchisee, at the end of the contract, from carrying out any activity competing with that of its former franchisor.

In the presence of such a clause, the franchisee undertakes not to affiliate, join or participate, directly or indirectly, in a network competing with the franchisor, whether in a different form of distribution (brand license, cooperative, selective distribution, etc.) or not. The franchisee obliged by a post-contractual non-affiliation clause may not create a network competing with that of its franchisor.

A judgment of the Commercial Chamber of the Court of Cassation of 28 September 2010 considered that the non-affiliation clauses could not be qualified as non-competition clauses since they did not have the effect of preventing the franchisee from actually operating its business, and thus escaped the requirement of meeting the conditions of validity of the non-competition clauses, both in domestic law and in Community competition law (Cass.com, 28 September 2010, appeal No. 09-13.888).

According to the Court of Cassation, the non-competition clause “is intended to limit the exercise by the franchisee of an activity similar or analogous to that of the network he leaves”  while the non-affiliation clause “is limited to restricting his freedom of affiliation to another network”.

By specifying that the purpose of non-affiliation is to restrict the freedom of affiliation to another network, the Court of Cassation also considers that it must not have the effect of preventing the former franchisee from freely continuing the operation of his business, including by carrying out an activity similar or analogous to that which was his when he was still a franchisee, because this restriction is that of non-competition.

The restriction on the franchisee’s freedom to conduct a business is considerably limited compared to the restrictions imposed by a non-compete clause insofar as the franchisee subject to a post-contractual non-affiliation clause remains free to carry on a competing activity under its own brand.