PME & Affaires

Franchise meetings Franchises: mme Licien independence and dependence This method of distribution must enable the franchisee to draw a large profit from the franchise relationship, his legal independence and his economic dependence having to fit into a relationship of common interest e franchisé est responsable The franchisee is responsible, intellectually as well as legally, for his activity and his acts. He is the direct interlocutor of his customers for the products or services he markets, assuming full responsibility for these towards third parties, the liability of the franchisor being open to challenge, unless he is the producer. In theory and even in practice, to a large extent, franchising maintains the legal independence of the contracting parties. This independence is found at the level of Regulation EEC 4087/88 of 30 November 1988 which validates franchising in Community law, despite article 85 of the EEC Treaty which prohibits agreements. This text requires third parties to be informed, by applying the exemption only if the franchisee indicates his status as an independent trader (article 4. C). The order of the French Minister of Finance of 21 February 1991 takes up the same requirement, specifying that this information must appear on all documents issued by the franchisee, in particular his advertising as well as inside and outside the point of sale, the indication not having to interfere with the common identity of the franchised network as the aforementioned exemption regulation specifies (article 4 C). The effects of independence are | dependence for the neophyte, a found in particular that of the established professional at the level of one of the fundamental elements of trade, the setting of prices: the franchisor may advise on prices but cannot, in any case, impose them. Thus, the network brings the franchisee the benefit of the group, while leaving him a legal independence to which most aspire. However, the franchisee's indepen- dence is limited by the need for an economic dependence, a factor of profit. Being a franchisee means above all adhering to ideas, methods, a brand. This form of necessary adhesion of the franchisee to the elements of the franchise concept is largely a factor of dependence. As Professor Le Tourneau indicates, "legal indepen- dence does not exclude economic dependence; a subtle balance must be established between these two ele- ments". However, this economic dependence thus created gives consumers the impression of a total osmosis between the franchised point of sale and the franchisor. Uniform presenta- tion, the brand, the same processes used, foster the reflex perception of the network, an essential factor of success in franchising. One must however distinguish the interest of a The dependence of the neophyte franchisee Someone who has never carried out any a tivité commerciale will no doubt be more prone to dependence than the professional since the most elementary rules will be passed on to him and he will thus tend to expect from the franchisor the answers to all questions of whatever nature and importance they may be. The possibility offered in France of carrying out most commercial activities without the most elementary qua- lification generates a large number of actors unaware of economic rules, and consequently many bankruptcies. For these neophytes, joining a fran- chise presents a fundamental interest: l'ac- sans ance egles ice : ses elles ¿011) - mbre (H30- !TAM cal: i les dori. de la ir li the interest of using franchising is very great for them, but it is the counterpart of a heavy economic dependence. André Gide wrote: "Man! the most complex of beings, and that is why the most dependent of beings. Of everything that has formed you, you depend." Many candidate traders seek, in franchising, the psychological security that a certain state of dependence provides them. Reassured by the franchisor's ease, the neophyte may be confident in letting himself be guided totally, to the point of giving rise to a relationship of filiation towards his franchisor. The franchisee, whose critical spirit often has not been able to develop because of training that is too quick and above all an absence of previous commercial experience, risks suffering from too great a passivity. For this franchisee, a soulless agent, without commercial drive, with an automatic pilot, the franchisor will necessarily have to do everything. His creative capacity will be broken. If the franchisee is quite wrong to behave in the opposite way to what should be his role, that of an independent trader above all, the franchisor has not understood in these cases that his role must not be that of an employer towards an agent, but that of a true partner who, after transmission of the elements of the concept, must be able to behave on an equal footing with his franchisee. He must see to it that the franchisee can have responsibilities within the network our en valorisant une indépendano réative facteur d'évolution du résear the whole network. The franchisee, already a professional in the activity of the concept, is better equipped for the choice. The limited dependence of the franchisee already a professional It is a more informed partner who will contract with the franchisor. The questions asked before joining will be more perceptive; the franchisee will indeed tend to want, thanks to his co-contractor, to benefit from the group effect certainly, but also to make up for a certain number of drawbacks of the profession that he will have noted during his individual practice. But here again, is the franchisee's expectation not excessive, does he not believe that thanks to franchising, his turnover will take off, as his problems will go up in smoke? It is at the outset the franchisor's duty of objectivity that will have to correct the excesses in one direction or the other. If the franchisee has been well informed, and if the franchisor's choice of the candidate is appropriate, the agreement will no doubt be profit- able for him as well as for the network to which he will bring the benefit of his own experience. The transmission of the fruit of a successful experience, the proximity of a partner In the next issues The different sales networks • Distinctive signs: from Franchise the shop sign to Concession: decorative objects Partner: The colours Direct selling The ownership of Licence 73E distinctive signs Network development this From the concept to the shop sign Structuring one's development LEGAL which must always be attentive, the effect of the group, image transmitted by the brand, justify a certain limit: the freedom of the franchisee as an independent trader. However, the parties must not hypocritically allow a paternalistic relationship to set in, a factor of depen- dence, cannot validly prosper.a Hubert BENSOUSSAN Lawyer Member of the college of Experts of the French Franchise Federation The support of your partner • Franchising and exclusivity Geographical zone exclusivity Supplier exclusivity Product exclusivity /* *Distribution exclusivity Promotion and advertising of franchising Michel Micmacher What are the characteristics of the French franchise network? What is its place in the European context? Is franchising destined to disappear in favour of partnership? So many questions to which Michel Micmacher, current Vice-President of Pronuptia, honorary president of the FFF (French Franchise Federation) and former President of the European Franchise Federation, answers. Quite frankly. How is European franchising doing? Mr Micmacher: It is like European construction, it is doing fairly well. There are significant differences between the member countries both at the level of the sectors of activity and with regard to the trades that fall under franchise status. What are the main lines of fracture? Mr Micmacher: One can distinguish three major markets. First the French market. It has the great particu- larity of having the highest turnover. As an example of this exceptional weight on the European market, one can cite Promodès (the group of the Continent hypermarkets), the leading European franchisor. Next comes the English market. It operates more on the American model, which differs significantly from the European model taken as a whole. There are an enormous number of franchises in the field of micro-enterprise. The choice of franchise status often presents itself as a means of circumventing labour legislation. Finally the German market, where franchising is of more interest for industrial or semi-industrial products. What fundamentally distinguishes the European model from the American model? What is the regulation that serves as a basis for franchising? Mr Micmacher: There are two Mr Micmacher: The distinction, basic regulations. The of a cultural nature, mainly concerns "Pronuptia" judgment of January 1986, so the relationship existing between called because our firm the franchisor and the franchisee. In the benefited from the first exemption which United States, between the franchisor and legalises its franchise agreement in the franchisee, it is a real Community law and lays the legislative foundations. Another judgment balance of power that does not turn in defending the symbol of the identity of the favour of the franchisee, who is network entrusts this task to the franchisor. in most cases liable to be exploited Article 85 of the Treaty of Rome at will. The European model also provides that there may be a is much more favourable certain number of derogations from the to the franchisee. The existence r- é system if all the parties find their advantages in it, and in particular if the consumer, who has confidence in a brand, finds his way in it. It is therefore necessarily required that the franchisor have the means of defending the identity of the network. But moreover a franchisor is forbidden to impose on his franchisee the installation of a computer system or to oblige him, for example, to carry out works, etc. ... It is not essential either that the franchisee buy items from the franchisor as long as the quality standards are complied with. What do you think of the current evolution of franchising towards forms of "partnership" with very vague legal outlines? Mr Micmacher: We will hear less and less about it in the future. The whole system was built on foundations which, at present, correspond less and less to reality: a franchisee new to the sector, a franchisor who was in a dominant position. From now on, there are more and more experienced franchisees. It is therefore impossible to maintain such dominant, such authoritarian relationships. The rise of forms of partnership is reactive and therefore cyclical. The franchisor is beginning to understand that he must listen to the fran- chisé, that the latter brings him at least his knowledge of the terrain. The partnership concept has no future insofar as it is a legal notion which, having no existence, means nothing. What is more, with this formula, one ends up no longer knowing who is guarantor of the brand image. Finally, one notes that more and more good partnership networks are coming to franchising.* T PROFILES OVERVIEW OF EUROPEAN FRANCHISING On an economic level, a great heterogeneity of franchising in Europe is noted. Its blossoming has taken place over the last ten years in a very uneven way in the different countries of the Community, both quantitatively and qualitatively. Franchising in Europe December 1994 *Country "Number of Number @ franchisors - *#ranchlsés Germany Austria $190 Belgium $225 Denmark Spain ¡France IG.Bretagne Hungary Italy :Norway. $125 Netherlands :Portugal Sweden :Czech Rep. -40 Yugoslavia 418 Italy $3,3500 $500 233000+ 125,700 (114975 $620 $18:650 LECU Maemplois $3,65 1 46,4 $88500 . 46300$ 10,83 • 20,56 $8,1 The table above shows a clear predominance of France over the other countries. It is interesting to note a significant development of franchising in recent years in countries such as Italy and Spain. A correction is needed concerning the German figure, which includes dealership in the franchise statistics, as is the case in the United States. Source French Franchise Federation "Franchising in Europe" March 1996 November/December 96 PME Affaires - 13