Become a Franchisor

Becoming a Franchisor, Creating a Network

You’ve created a business, invented a service.

You have successfully operated your business and validated its economic model and profitability.

Now you want to develop a franchise network or, more generally, a distribution network. Becoming a franchisor, creating your franchise, developing your network: that’s your ambition.

Are you wondering how to become a franchisor, and more generally, how to create your distribution network?

Gouache Avocats helps you become a franchisor. We can help you realize this ambitious project, the success of which requires meticulous preparation and adherence to a proven methodology.

Every year, numerous brands have entrusted Gouache Avocats with the creation of their distribution networks. For several years, the firm has been ranked by the magazine “Décideurs” as a leading firm (the highest distinction in the ranking) in franchise law, and it is recommended by Legal 500 in distribution and competition law (see our awards). In 2022, the firm received the Gold Trophy for Distribution Law.

LexisNexis, a publisher of essential legal content for all legal professionals (lawyers, corporate legal managers, notaries, etc.), entrusted the firm’s lawyers with updating the seven volumes of their encyclopedia (Jurisclasseur) relating to franchise agreements.

The Strategic Importance of Drafting a Franchise Agreement

Drafting a franchise agreement with Gouache Avocats addresses strategic issues for the network:

• it must reflect the organization chosen by the franchisor;
• it must establish appropriate financial flows enabling the franchisor to finance network development, franchisee training, point-of-sale management, brand communication, and generate sufficient profits for the franchisor;
• it must ensure the franchisor’s legal security by protecting its trademarks, know-how, and the scope of its network.

The purpose of a franchise agreement is to allow an independent entrepreneur to replicate the success of another entrepreneur by applying their strategies. As such, the dual condition for the validity of a franchise agreement lies in the existence of original, useful, and secret know-how, and the validity of the trademark license associated with the use of that know-how.

In this context, franchising establishes a vertical relationship between the parties to the contract: the franchisor owns the know-how and the brand symbols that attract customers. The franchisor must therefore ensure its sole control, while the franchisee is responsible for strictly applying the know-how—all of it, but nothing but the know-how—while respecting the network’s standards and thus promoting these intellectual property rights. This is one of the constraints of franchising for the franchisee, but also a condition for its success.

The franchise agreement must therefore allow the franchisor to fully control its know-how and its application, to protect its brand, and to monitor the franchisee’s business. This point is essential: franchising does not establish a relationship between equals, based on mutual respect and camaraderie. The franchisee, although legally independent, is subject to the strict control of the franchisor on whom they are economically dependent.

For the franchisor, the long-term viability of their network and the value of their brand are at stake. This point is absolutely strategic. Moreover, its importance varies depending on the network’s activity.

A distribution network is relatively simple to manage from this perspective: the franchisor alone controls the product range and the supply of exclusive products. If the franchisee attempts to deviate from the franchisee’s model or fails to apply the know-how satisfactorily, the consequences are immediate. The franchisor ceases deliveries, invokes the termination clause, and removes the brand. The franchisee is cut off from their base and no longer has the means to operate. A service franchise network, on the other hand, will have more difficulty over time preventing the popularization of its know-how, or even its misappropriation and exploitation by former franchisees who have become competitors.

What are the steps to becoming a franchisor?

Discover all the steps you need to take to create your franchise network.

Watch the video on “How to Become a Franchisor”

Becoming a franchisor and creating a distribution network involves following standardized steps:

• • validating a business model;
  • defining a standard profit and loss statement for a distributor;
  • defining the catchment areas where the concept can be implemented;
  • and consequently establishing a market segmentation (zoning).

• define the organizational needs of the future franchisor or network promoter (development, management and control of the network, brand marketing, network supply);
• build on this basis the financial flows necessary to ensure the franchisor’s or network head’s revenue;
• define the typical distributor profile and the development policy;
• build the franchisor’s business plan;
• define the main principles of the legal organization of the relationship between the franchisor and the franchisee, or more generally between the network head and the distributor (training, use of the brand, exclusivity: territorial, supply, resale, activity, etc.);
• draft the chosen franchise or distribution agreement;
• draft the pre-contractual information document required by Article L. 330-3 of the French Commercial Code (codification of the “DOUBIN” law);
• to draft the know-how manual if franchising is chosen;
• to draft all the documents necessary for launching the network;
• to define the network launch marketing plan.

This mission is multidisciplinary and requires the combined expertise of professionals in organization, marketing and geomarketing, chartered accountants, and the firm to be successfully completed.

We can help you embark on this process and create your franchise network.