Become a Franchisor

Become a franchisor, create a network

You created a business, invented a service.

You have successfully exploited it and validated the economic model and the existence of profitability.

You now have the will to develop a franchise network or more generally a distribution network. Becoming a franchisor, creating your franchise, developing your network: that’s your ambition.

Wondering how to become a franchisor, more generally how to create your distribution network?

Gouache Avocats helps you become a franchisor. We can help you achieve this ambitious project, the success of which requires careful preparation and the monitoring of a proven methodology.

Each year, many brands have trusted Gouache Avocats  to create their distribution network. For several years, the firm has been classified by the magazine “Décideurs” as essential (the highest distinction in the ranking) in franchise law, and it is recommended by the Legal 500 in distribution and competition law (see our distinctions). In 2022, the firm received the Golden Trophy for Distribution Law.

LexisNexis, a publisher of essential legal content for all lawyers (lawyers, corporate legal officers, notaries, etc.) has entrusted the firm’s lawyers with the updating of the 7 fascicles of their encyclopedia (Jurisclasseur) relating to the franchise contract.

The strategic challenges of drafting the franchise agreement

The drafting of a franchise agreement by Gouache Avocats meets strategic challenges for the network:

• it must reflect the organisation chosen by the franchisor;
• it must organize appropriate financial flows allowing the franchisor to finance the development of the network, the training of franchisees, the animation of the points of sale, the communication of the brand and to generate for the franchisor a sufficient result;
• it must ensure the legal security of the franchisor by protecting its brands, its know-how, the perimeter of its network.

The purpose of the franchise agreement is to allow an independent contractor to repeat the success of another contractor by applying its revenues. As such, the double condition of 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 exploitation of this know-how.

In this context, the franchise establishes a vertical relationship between the parties to the contract: the franchisor owns the know-how and the signs of customer rallying. It must therefore ensure sole control, it being the responsibility of the franchisee to strictly apply the know-how, all the know-how but nothing but the know-how, respecting the standards of the network and thus ensuring the promotion of these intellectual property rights. This is one of the constraints of franchising for the franchisee, but also a condition for its success.

The franchise agreementmust thus allow the franchisor to perfectly master its know-how and control its application, protect its brand and control the franchisee’s activity. This point is essential: frankness does not establish a relationship between peers, egalitarian and frank camaraderie. The franchisee, although legally independent, is subject to the strict control of the franchisor on which it depends economically.

For the latter, it is a question of the sustainability of its network and the value of its brand. This point is absolutely strategic. In addition, the importance of this point varies according to the activity of the network.

A distribution network is quite simple to manage from this point of view: the franchisor has sole control over the assortment and supply of exclusive products. Whether the franchisee attempts dissent or fails to apply the know-how satisfactorily, the penalty is immediate. The franchisor ceases to deliver the products, brings the termination clause into play and removes the brand. The franchisee is cut off from its bases and no longer has the means to practice. A service franchise network, on the other hand, will have more difficulty, over time, in avoiding the popularization of its know-how, or even its diversion and exploitation by former franchisees who have become competitors.

What are the steps to becoming a franchisor?

Find out all the steps that will have to be taken to create your franchise network.

Watch the video on “How to Become a Franchisor”

Becoming a franchisor, creating a distribution network requires taking standardised steps to:

• • validation of an economic model;
  • definition of the typical operating account of a distributor;
  • definition of the catchment areas on which the concept can be expressed;
  • correlatively establish a division of its reference market (zoning);

• define the organisational needs of the future franchisor or network promoter (development, animation and control of the network, brand marketing, network supply);
• build on this basis the financial flows to ensure the income of the franchisor or the head of the network;
• define the typical profile of the distributor and the development policy;
• build the franchisor’s business plan;
• define the main principles of legal organization of the relationship between the franchisor and the franchisee or more generally between the head of the network and the distributor (training, use of the brand, exclusivities: territorial, procurement, resale, activity, etc.);
• to draft the chosen franchise or distribution contract;
• to draft the pre-contractual information document provided for in Article L. 330-3 of the Commercial Code (codification of the “DOUBIN” law);
• to write the know-how manual if the franchise has been chosen;
• to draft all the documents necessary for the launch of the network;
• define the network launch marketing plan.

This mission is multidisciplinary and requires the joint intervention of professionals from the organization, marketing and geomarketing, accountants, and the firm to be carried out.

We can help you get started and build your franchise network.