Collo vs McDo

Legal concepts

Know-how

Secret, substantial, identified. These three adjectives, defined by European law, are the economic counterpart of the fees a franchisee pays.

In brief

  • Defined by Regulation (EU) 2022/720, Article 1(1)(j) — and, at the time of the case, by Regulation (EEC) No 4087/88.
  • Secret: not generally known or easily accessible (what matters is the overall arrangement).
  • Substantial: significant and useful to the franchisee in operating the business.
  • Identified: described in a sufficiently comprehensive manner to be verifiable — hence the role of the operations manual, the network's “bible”.
  • No definition in French law: the courts adopt the European definition.

Know-how is what distinguishes a franchise from a mere trade mark licence. It is also what the franchisee pays for: the fee only has consideration if the network passes on methods that are worth something.

European law defines it by three cumulative adjectives — secret, substantial, identified —, a formula unchanged since the 1988 regulation. The “identified” requirement explains the existence of the operations manual: without a document, there is no proof of the know-how.

The Court of Justice held as early as the Pronuptia judgment (1986) that protecting this know-how justifies the most restrictive clauses of the agreement: prohibition on operating a competing business, confidentiality obligation, approval of the transferee. The 2022 regulation sets its limit: a non-compete obligation after the end of the agreement is permitted only if it is limited to the premises of operation, indispensable to protect the know-how, and of a maximum duration of one year.

Sources

External sources.

  1. Regulation (EU) 2022/720 of 10 May 2022, Article 1 — EUR-Lex
  2. Regulation (EEC) No 4087/88 of 30 November 1988 — EUR-Lex

Where this comes up in the case file

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