FRANCE Law and Practice Contributed by: François-Xavier Awatar and Lina Lahlou, Osborne Clarke
6.2 Exclusive Territories and Competing Businesses Exclusive Territories The franchisor may grant exclusive territories to its franchisees, it being noted that territorial exclusivity is not inherent to the franchise relationship under French law. Competing Business During the term of the franchise agreement, a non- competition obligation imposed upon the franchisee is in principle lawful, as it is inherent to the protection of the franchisor’s know-how. Upon expiry or termination of the franchise agreement, post-contractual non-competition clauses falling with - in the scope of Article L. 341-2 I of the Commercial Code are deemed unwritten unless they satisfy the following cumulative conditions: • the clause relates exclusively to goods and ser - vices in competition with those that are the subject of the franchise agreement; • it is limited in its geographical scope to the prem - ises and land from which the franchisee conducted its business during the term of the agreement; • it is indispensable for the protection of know-how that is substantial, specific and secret; and • its duration does not exceed one year from the date of expiry or termination of the agreement. 6.3 Requiring Franchisees to Purchase Specific Goods and Services An exclusive sourcing clause requiring the franchisee to procure goods or services exclusively from the fran - chisor or from suppliers approved by the latter is valid under French and European law (VBER), provided that it is necessary for the replication of the franchise sys - tem and the preservation of the network’s identity, and that the franchise confers a genuine competitive advantage upon the franchisee. Without prejudice to the foregoing, any exclusiv - ity obligation not falling within the cases referred to previously shall be limited to a maximum duration of ten years pursuant to Article L. 330-1 of the Com - mercial Code and, in accordance with EU Regulation
Non-Competition Clauses During the term of the franchise agreement, a non- competition obligation imposed upon the franchisee is characterised as an exclusivity obligation within the meaning of EU Regulation 2022/720 on vertical agreements (VBER) and is accordingly subject to the limitations applicable thereto. Post-contractual non-competition clauses are strictly regulated by Article L. 341-2 of the Commercial Code. To be valid and enforceable, such a clause must sat - isfy the following cumulative conditions: • it must relate exclusively to goods and services that are in competition with those that are the sub - ject of the franchise agreement; • it must be limited in its geographical scope to the premises and land from which the franchisee has conducted its business during the term of the agreement; • it must be indispensable for the protection of know-how that is substantial, specific and confi - dential; and • its duration must not exceed one year from the expiry or termination of the franchise agreement. Resale Price Maintenance Any clause restricting, whether directly or indirectly, the franchisee’s ability to freely determine its resale price constitutes a restriction. Only maximum resale prices and recommended resale prices are permis - sible, provided that they do not amount, in practice, to fixed or minimum resale prices (Article 4 (a) of EU Regulation 2022/720 VBER). Online Sales Any clause preventing the effective use of the internet by the franchisee for the purpose of selling the con - tract goods or services, or prohibiting the use of an entire online advertising channel, constitutes a restric - tion. However, a prohibition imposed by the franchisor on the use of third-party online marketplaces by the franchisee remains permissible, provided that the franchisee retains the freedom to operate its own online sales channel (Article 4 (e) of EU Regulation 2022/720 VBER).
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