Can a franchisor end the relationship? Yes. Can it do so overnight? That is another question, and the Commercial Code has answered it since 1996.
The text
The rule is now found in article L. 442-1, II of the Commercial Code, resulting from Order no. 2019-359 of 24 April 2019 - it was previously in article L. 442-6, I, 5°.
“Any person engaged in production, distribution or service activities who abruptly terminates, even partially, an established commercial relationship, in the absence of written notice that takes into account in particular the duration of the commercial relationship, with reference to commercial practice or inter-professional agreements […], incurs liability and is obliged to make good the damage caused.”Commercial Code, article L. 442-1, II, 1st paragraph
Two immediate clarifications:
- since 2019, paragraph 2 has introduced an eighteen-month ceiling: “the liability of the party terminating the relationship cannot be incurred on the ground of insufficient duration where it has given eighteen months' notice”. This is not a mandatory maximum notice period, but an immunity - and it covers only the complaint relating to duration;
- paragraph 3 reserves termination without notice for cases where the other party fails to perform its obligations, or force majeure.
The applicable version depends on the date of the termination, not that of the lawsuit: the text resulting from the 2019 Order applies to terminations occurring on or after 26 April 2019.
What “established relationship” means
The relationship must be, according to the formula adopted in case law, “sufficiently long, significant and stable, such that [the victim] could reasonably anticipate a certain continuity of business flow for the future”. The commercial chamber has clarified several points:
- the foreseeability of the termination does not deprive it of its abrupt character (Com., 28 September 2022, no. 21-16.209);
- the notice must be effective: the relationship must continue on the previous terms for its duration (Com., 24 June 2020, no. 18-25.517);
- partial termination is covered: a deliberate reduction in orders or an unfavourable change in pricing terms may be enough;
- the non-performance that allows notice to be dispensed with must be of sufficient seriousness (Com., 7 September 2022, no. 21-13.691).
Litigation falls within the jurisdiction of eight specialised commercial courts (Bordeaux, Fort-de-France, Lyon, Marseille, Nancy, Paris, Rennes, Tourcoing), with the Paris Court of Appeal having exclusive appellate jurisdiction (articles L. 442-4, III and D. 442-2 of the Commercial Code).
The tricky point: fixed-term franchises
Here, two rules intersect, and care must be taken not to confuse them.
On the one hand, article 1212, paragraph 2, of the Civil Code is clear: “Where the contract is concluded for a fixed term, each party must perform it until its end. No one may demand the renewal of the contract.” The Court of Cassation inferred from this, in a real-estate franchise case (Com., 7 September 2022, no. 21-17.914), that the franchisor is free not to renew, subject only to abuse - and that reorganising its network is not in itself abusive.
On the other hand, article L. 442-1, II does not target the contract, but the commercial relationship. The commercial chamber held, in a published judgment of 18 October 2023 (no. 22-20.438), that successive fixed-term contracts expressly excluding tacit renewal do not rule out the existence of an established commercial relationship.
In other words: the freedom not to renew and the requirement of notice proportionate to the length of the relationship coexist. In practice, a notice of non-renewal given sufficiently early before the end of the term serves as notice.
In the interest of research honesty: we have not found a judgment of the commercial chamber ruling squarely on the non-renewal of a fixed-term franchise agreement under article L. 442-1, II. There is a school of legal thought according to which the accepted precariousness of a fixed-term contract excludes any legitimate expectation of continuity. We prefer to point out this grey area rather than fill it with a general assertion.
And in the Collorafi case file?
The provision could not be relied on in the same way: the relationship was not ended by non-renewal, but by the operation of a termination clause triggered for non-payment, in 1998. It was therefore on the ground of good faith in the implementation of the clause that the Paris Court of Appeal ruled on 8 March 2000, finding the termination wrongful. Notice, for its part, was at the heart of another complaint: the court considered that McDonald's, aware of the losses, should have proposed an overall plan over eighteen months - a period which, by coincidence, is the one the legislature would adopt twenty years later as the notice ceiling.
The parliamentary debates of the time on the regulation of commercial relationships, which Bernard Collorafi had followed and commented on, are kept in the case file: see the bill on new economic regulations and his letter to French MPs.
Abrupt termination, termination, rescission: three different things
The terms are often confused, and it makes all the difference.
Abrupt termination under article L. 442-1, II of the Commercial Code does not penalise the act of ending a relationship: it penalises ending it without sufficient notice. One may be fully entitled to end a relationship and nonetheless owe damages, calculated on the margin lost during the notice period that should have been granted.
The termination clause, for its part, ends the contract automatically in the event of a breach - provided that a formal notice remains unheeded and that it expressly refers to the clause. The judge then does not weigh the seriousness of the breach: the judge records it. The only counterweight is the good faith of the party invoking it.
Finally, the termination may be attributed to the partner's fault, which moves the debate onto the ground of contractual liability. These disputes come before the Commercial Court - and, when the operator does not survive the termination, often end there, in compulsory liquidation.