European Franchise Newsletter n° 44

AUSTRIA

• Franchising in Austria: Current Economic Figures and Key Legal Considerations

EUROPEAN UNION

• CMA announces first eight investigations into consumer law breaches using new enforcement powers

FRANCE

• Abrupt termination and franchising: the issue of the multi-unit franchisees

GERMANY

• Navigating New Packaging Duties Across the EU – for Franchise & Distribution Systems

POLAND

• Greenwashing on the Rise? Consumer Protection Authority Intensifies Scrutiny of Environmental Claims

PORTUGAL

• Breaking Off Distribution Negotiations: Contractual Expectation and Civil Liability

SLOVAKIA

• Slovakia: New rules on fake and misleading consumer reviews

THE NETHERLANDS

• The (non-existent) immunity of the franchisee under Section 7:912 DCC

FRANCE

Abrupt termination and franchising: the issue of the multi-unit franchisees

Paris Court of Appeal, 19 November 2025, No. 23/18673

In this case, a franchisor had entered into two franchise agreements for the operation of real estate agencies under its brand, with three separate entities (one for the first agreement, and two for the second agreement) that were managed by the same owner and director.

One of the entities had decided not to renew the first franchise agreement upon its expiration.

Both franchise agreements contained a termination clause authorising the franchisor to terminate the franchise agreement in the event of the termination of another franchise agreement (for any reason) “entered into between the franchisor and a company linked to the entity holding this agreement by at least one shareholder or director.”

The franchisor had decided to invoke this clause and had therefore terminated the second franchise agreement concluded with the two other entities, with effect from the date of non-renewal of the first agreement.

The two companies affected by the termination sued the franchisor on the ground of Article L.442-1 II of the French Commercial Code, claiming that they had suffered an abrupt termination of an established commercial relationship.

In its ruling, the court of appeal first pointed out that an established commercial relationship is characterized by continuous, stable and regular dealings, allowing the business partner to reasonably anticipate the continuation of the business relationship. In this case, the succession of fixed-term contracts constituted an established commercial relationship.

The franchisor’s argument that the relationship was precarious and not established on the grounds that the successive franchise agreements were stipulated as being not tacitly renewable was therefore, unsurprisingly, rejected.

However, the contribution of the ruling lies in the court’s treatment of the aforementioned clause, which provided for the possibility of terminating the franchise agreement in the event of termination of another franchise agreement with a company linked to the first by a common shareholder or director.
The franchisor argued that the termination resulted from the decision of the companies' common director not to renew the first franchise agreement and, on that basis, invoked the interdependence of the agreements and therefore the lapse ("caducité") the second franchise agreement due to the termination of the first.

The court of appeal rejected this argument.

It first noted that the franchisor had expressly relied on early termination, and not on lapse, when informing the franchisee of its decision not to continue the business relationship. Furthermore, the court found that the conditions for interdependence within the meaning of Article 1186 of the French Civil Code were not met, as the contracts had been concluded on separate dates and did not form part of a single economic transaction, as they could be performed independently.

In the absence of any serious breach of contract attributable to the companies subject to the termination, the termination was therefore solely attributable to the franchisor.

However, the validity of the clause is not called into question: the franchisor was indeed entitled to rely on it to justify early termination. But it could not do so while disregarding the prohibition of abruptly terminating an established commercial relationship, in the absence of serious misconduct on the part of the franchisee or a case of force majeure.

In other words, the franchisor was contractually entitled to terminate but still had to grant a reasonable notice period.

In this case, the court ruled that the termination was abrupt and considered that, given that the relationships with the two companies had lasted respectively 18 and 23 years, a twelve-month prior notice should have been granted to the franchisee.

It therefore ordered the franchisor to compensate the franchisees, calculating damages based on the lost contribution margin during the notice period that should have been granted.

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