Franchisee, franchisor, and lessor you wish to be done with the franchise agreement or a lease before the end of your term. What are the consequences for the client? Can the franchisee can lay claim to the rights of the client? PICOVSCHI lawyers are here to update you on the state of rights and of the jurisdiction of the matter.
The Franchisee has their own clientele regarding the lessor: decision of the Court of Cassation of 2002
A franchisee, Conforama, was the subject of a refusal to renew his lease and thus demanded an eviction indemnity. The lessor believed that the franchisee could not make this claim, because he could not support that commercial establishment belonged to him. Since it was established in 1973 at the Court of Cassation, the client has been considered as one of the criterion determining commercial establishments.
By the Trévisan judgment of March 27, 2002, the 3rd civil chamber of the Court of Cassation has had to consider the question of the status of the owner and not that of commercial establishments by the franchisee, thus carrying out the proceedings on the owner and not to clientele.
The High Court has thus considered, “on the one hand, if the clientele is attached at the national level to the notoriety of the brand of the franchisor, and if the local clientele is made by means of the franchisee, including the tangible elements of the commercial establishments, machinery and stock, and the intangible elements that constitute the lease, that the clientele themselves is part of the commercial establishments thus, even if they were not the owner of the brand at the execution of the franchise agreement, they created it through their own activity with methods such as personal contracting with their suppliers or lenders of funds, which they implemented at ones own risk.”
It follows from his judgment in terms of franchising: there exists a double level of clientele: that attached to the national notoriety of the brand of the franchisor, and that locally of the franchisee due to their own means.
One should be warned not to generalize this judgment to all of the situations that may be faced by franchises. In this case, the Court of Cassation, voting on the grounds of commercial leases wanted to leave the possibility of the franchisee to obtain an eviction of indemnity in the case of non-renewal of their lease. Recall by virtue of of article L145-14 Commerce Code, the lessor is in the right to refuse the renewal of the commercial lease, but he must then give an eviction indemnity to the lease holder as to not invoke any of the grounds provided by the law to justify such a decision.
Also note that today, notably since the Chattawak Judgment given by the Appeals Court of Paris April 9 2009, the courts no longer consider the client as being an essential criterion in the determination of commercial establishments, but only as a component that may exist.
The Right of the Franchisor over the clientele
Trévisan was not followed in all domains of the case law. Thus by a judgment made on October 2, 2007 SA Andey c/ SAS Vanica, the administrative appeals court of Chambéry judged that if the franchisor has established a customer loyalty system with its brand through loyalty cards, it is the owner of the clientele.
Such reasoning results from the fact that the franchisee was not owner of the customer loyalty files, because it was specified at the signing of the franchise agreement that the program had been developed by the franchisor, that the franchisee was a collector. In addition, it was the franchisor who was supporting the financial burden of the advantages clients procured through loyalty cards.
Besides this in the car dealership sector, the commercial chamber of the Court of Cassation passed a judgment May 6 2008 did not understand the case law Trévisan, a Peugeot dealer argued that, “the clientele constituted by the dealership by the exploitation of the brand is associated with that brand.”
It appears according to the case law of some sectors, the judges don’t appreciate the property of the customer in the same way. In effect, in the fast food industry, hotel service, automobile sales, beauty institutions, supermarkets, etc. the client is more attached to the brand of the franchisor then the franchisee, which somewhat reduces the franchisee’s possibility to claim a right over the client. However, in other sectors such as hair salons, it seems that the client is more attached to the person of the franchisee then to the name of the franchisor, making it more of an undertaking by the franchisee then franchisor.
If you are a franchisee, franchisor, or lessor, in the same situation, it would be wise for you to consult with a lawyer in franchise law to assure that you have the best defense ever and to protect your rights. PICOVSCHI lawyers are here at your disposition ready to share their experience and expertise with you.