Franchising can be an excellent way to grow a business, but it also brings legal complexity. Disputes over royalties and contract terms are common, and franchisees often find themselves questioning the balance of power within the agreement. Understanding how French and English law treat these contracts can make a significant difference.
What is a franchise agreement?
Under European law, a franchise agreement is a contract where one business (the franchisor) allows another (the franchisee) to use its brand, systems and know-how in exchange for payment. It’s a relationship built on trust, clarity, and mutual support and when that balance breaks down, disputes can follow.
How France regulates franchising
In France, franchise relationships are governed by a mix of statutory rules and case law.
The Doubin Law requires franchisors to give clear pre-contractual information to potential franchisees before any agreement is signed.
To be valid, a franchise agreement must include:
- Transfer of original and substantial know-how
- The right to use a distinctive sign or brand
- Ongoing technical or commercial support
Royalties, whether an initial entry fee or regular payments, must reflect genuine value. Courts will look closely at whether the franchisor delivers the promised assistance, and whether the franchisee is receiving fair consideration.
French courts take an interventionist approach. Judges may, in certain cases, order the renegotiation of a contract if circumstances change significantly (Huard, Cass. Com., 1992; Art. 1195 Civil Code). They can even re-balance a contract that has become unfair.
This focus on good faith and fairness means that franchisees in France often have stronger legal protection if a dispute arises.
The UK approach
In the UK, there is no specific franchise law. The principle of freedom of contract applies meaning parties are largely bound by what they sign, even if the outcome becomes commercially harsh.
There is no legal obligation to disclose pre-contract information, and franchise agreements are often presented on a “take-it-or-leave-it” basis. The British Franchise Association provides voluntary standards, but compliance isn’t compulsory.
While English courts enforce contracts strictly, they will intervene where clauses breach competition law or are grossly unfair. Notable cases such as Winkworth Franchising Ltd v Goble [2023] and London Business House Ltd v Pitman Training Ltd [2023] demonstrate the courts’ emphasis on applying the written terms as agreed.
Key issues in franchise disputes
- Royalty calculations – unclear definitions of turnover or revenue often spark disagreements.
- Transparency – franchisees want proof that fees fund real marketing or support.
- Market changes – economic shifts can make fees disproportionate to profit, leading to renegotiation attempts.
- Termination – ending the contract can create conflict over final payments or refunds.
Good drafting and independent legal advice before signing can prevent many of these problems.
Which system protects franchisees more?
French law tends to favour balance and good faith between the parties. UK law focuses on enforcing the written contract. In practice, this means French franchisees enjoy broader protection, while UK franchisees must rely more heavily on careful contract negotiation.
In summary
Franchise relationships demand transparency and fairness from the start. Whether you’re a franchisor or franchisee, it’s vital to understand how your agreement will be interpreted under the law chosen in the contract, and where disputes will be resolved.
At Tees, we can review your franchise documentation, assess potential risks, and help you negotiate fair and practical terms in either jurisdiction.
