McDonald's France officially dates the start of its history to 1979, in Strasbourg. Yet a restaurant bearing the brand had existed in France for seven years. Its operator was called Raymond Dayan, and his lawsuit against McDonald's Corporation became, in the United States, a leading judgment in franchise law.
A 1% licence
The first restaurant under the McDonald's brand in France opened on 30 June 1972 in Créteil. A second followed on the Champs-Élysées about a year later. They were not operated by McDonald's Corporation, but by Raymond Dayan, holder since 1971 of a master licence agreement (master license agreement) for France.
This agreement has a history: according to the judgment of the Illinois Appellate Court, it was concluded as part of a court settlement, Dayan having sued McDonald's as early as 1970. Its terms, as reported by the court:
| Clause | Content |
|---|---|
| Term | 30 years |
| Fee | 1% of gross turnover |
| Real estate | borne by Dayan |
| McDonald's services | provided only on written request, and at his expense |
The court notes that Dayan had been offered a standard 3% licence - with the corresponding services - but that he “insisted on the 1% development licence”, a McDonald's executive having warned him that “the 1% licence was a mistake”. He would eventually operate fourteen restaurants.
Several French press sources mention a ceiling of 150 restaurants, exclusivity extended to Normandy and a fee step raised to 2.5% after twenty-five years. These elements do not appear in the judgment consulted and are not presented here as established.
The break
In April 1978, McDonald's notified Dayan of a breach of the QSC standards - Quality, Service, Cleanliness -, the foundation of the network's quality control. The inspections carried out in 1977 by the company's inspectors describe “filthy” establishments; one of them speaks of “the worst restaurants I have ever seen”. Unapproved products and failings in food handling, staff training and equipment were cited.
Dayan disputed this. He argued that the real reason lay elsewhere: McDonald's had allegedly wanted to recover restaurants that had become profitable, and had raised the quality complaint only after his refusal to sell. This is where the case becomes a landmark judgment.
“Where good cause exists, there is no bad faith”
The trial court dismissed Dayan's claim in 1982. The Illinois Appellate Court affirmed on 16 April 1984 (Dayan v. McDonald's Corp., 125 Ill. App. 3d 972). Its reasoning, in three steps:
- “an obligation of good faith and fair dealing is implied in every contract absent express disavowal”;
- “a franchisor may terminate a franchise agreement only where there is good cause (good cause)”;
- but: “where good cause exists, there is no bad faith” - and therefore “motive is irrelevant to the assessment of good-faith performance”.
Put simply: since the breach of the QSC standards was real, it mattered little that McDonald's also had an interest in recovering the restaurants. Motive cannot be pleaded. This is precisely the argument on which Dayan lost. A judgment delivered the same day also ordered him to pay McDonald's more than 1.5 million dollars in lawyers' fees, by way of a procedural sanction.
The comparison with French law is instructive, and it must be made with caution: these are two distinct systems. Whereas the Illinois court disregards motive once good cause exists, the French Court of Cassation accepts that a termination clause implemented in bad faith does not take effect - this is the reasoning that the Paris Court of Appeal would adopt in 2000.
O'Kitch, then Quick
Deprived of the brand, Dayan kept his fourteen restaurants and renamed them O'Kitch. The chain was bought by Quick in 1986 and the outlets converted.
In the meantime, McDonald's Corporation had regained a foothold in France on its own: a restaurant opened on 17 September 1979 on Place des Halles in Strasbourg, presented ever since as “the first McDonald's restaurant in France”. The opening took place during the dispute with Dayan. The thousandth French restaurant would open in 2003.
The network's development in the 1990s, its pace of openings and its recruitment, is documented in the business press of the time kept in the case file: Le Figaro Économie and the Revue H&R investigation into restaurant chains.