Other forms of organized independent businesses

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Today someone who wants to develop in the market quickly with 2-3 French business operations with a minimum of financial and human resources has no choice but to use the engineering of franchising.

It was often said in the 80s that franchising was the "voice of the poor." Indeed, franchising allows you to develop with the work and the capital of franchisees, independent retailers. A multinational company will rather choose instead to start its development the branch system (eg. ZARA, GAP, Office Depot, Starbucks Coffee).



The main distinction between the trademark license and franchising is the existence in franchising of a commercial original and own know-how.
The trademark license contract may also be accompanied by an assistance obligation, imposing a royalty fee as well as obligations relating to the opening, design and layout of the store. The supply exclusivities and management of the brand image are the foundations of the trademark license in order to achieve also a uniform standardization of the trademark.
But this contractual method is only suitable for notorious trademarks/trade signs. If your name is Chanel, Hermes, Dior ... you can make trademark licence agreement.
The fee paid by the licensee corresponds to the reputation of the brand. Indeed, a notorious trademark / sign generates revenues immediately.

In franchising it’s the opposite. You are not yet known (by assumption), but you have a repeatable know-how, so it is through the ratio of the number of franchise openings that your trade sign will become notorious.
The franchisor by the quality of its continuing relationship with each of its franchisees and an attractive brand image will attract many candidate franchisees. It is by the number of franchisees satisfied that, at a certain point in time, your trademark / sign will become notorious and will have then won your challenge.



This is an agreement by which a retailer (dealer) puts its distribution business in the service of a company, usually industrial, (grantor) to ensure exclusively in a given territory, for a limited period and under the supervision of the grantor the distribution of branded products which monopoly is conceded to him.
Concession involves the usual distribution of materials requiring specific techniques (eg car dealers).

The concession contract often contains a double exclusivity. On the one hand, the distributor agrees to be supplied only from the licensor and undertakes not to sell competing products. On the other hand, the supplier agrees to deliver products only to the dealer (concessionary) in the exclusive zone.

The distinction between exclusive concession and franchising is based, essentially, on the existence in franchising of transmission of know-how and continuing assistance between franchisor and franchisee. But we must recognize that the concession is the mother of franchising (particularly in distribution). We can now, moreover, observe that the concession networks are getting closer and closer to the fundamentals of franchising. However, there can be no concession in the services sector, as there are no branded products to distribute.



The birth of the cooperative goes back to 1855, under Napoleon III, but at the time it was concerning more artisans than traders. 30 years later, in Reims, for the first time, traders decided to unite to be stronger.

Franchising and cooperatives are two economic systems illustrating the success of distribution networks.

Franchising is based on a vertical pattern, while the cooperative is organized around a horizontal pattern. We find in the structure of the cooperative a common brand and technical and commercial assistance, which are two elements of franchising.

What differentiates this mode of operation of a real franchise is the lack of know-how with training related to the transmission of this know-how (though again the cooperative is similar to fundamentals of franchising).

It must be acknowledged that by their dual status of members and users (franchisor and franchisees at the same time), cooperatives are close to consumers.... But on the other hand, networks of well-structured franchises have demonstrated their dynamism and their efficiency primarily due to their speed in decision-making and their implementation by the network.

Finally, the cooperative is a technique in which the Democratic Board of Directors and the President are elected by a majority of the members of the group. The principle is simple - one man, one vote.
The partners are considered as customers of the cooperative and vice versa. In the sixties, many purchasing groups were created by the technique of the cooperative.

The disadvantage of the cooperative and its current decline can be explained by the fact that the development in modern commerce is a question of speed, the cooperative is known for its slow decision-making.
Indeed, the minority members prevent the application of trade policies adopted by the majority.
It is this inertia that is the main handicap in the ideology of the cooperative (not to say Marxist-Leninist based ideology), while franchising is a neo-capitalist system!

Olivier Gast a tenté de faire une synthèse de ces techniques (franchise et coopérative) par le terme « coope-franchise » qu'il a lancé en 1995 lors d'un fameux dîner - débat du CEDRE. Olivier Gast attempted to make a synthesis of these techniques (cooperative and franchising) with the term “Coope-franchise” that he first mentioned in 1995 during a memorable CEDRE debate - dinner. (See “The coope – franchise”, CEDRE Debate - Dinner, in November 1996)

But there are still large cooperatives as “Système U”, “Monsieur Bricolage”, etc. ...



Commission-affilitation is widely used in the textile sector – being a particular form of a franchise agreement. Its specificity - the stock is not owned by the franchisee, but by the franchisor. The contract of commission-affiliation is a contract whereby the distributor trader, said "affiliate", owner of his own business and independent trader, sells for and on behalf of a brand, supplier, the merchandise that he doesn’t own and which is confided to him, as a deposit for the sale to the final consumer. The franchisee, independent trader is only remunerated by a commission paid once a month approximately by the franchisor on the products he sold. This technique had its heyday in the 90s.

A recent ruling of the Court of Appeal of Paris has reclassified the franchise commission affiliation contract in a commercial agent contract, thus condemning the franchisor to pay the franchisee - affiliate at the term of the contract, damages based on 3 years of commission.
The Chattawak company, defended by lawyer Rémi de Balman had failed and could not defend advantageously the contract of commission-affiliation.

Fortunately and very recently, the Cour de Cassation [French supreme court], on 26 February 2008 in the famous ‘Chattawak’ case, recognized the legal status of the commission affiliation franchise (see “Euro Letter” below, European Letter of commercial networks, March 2008).

This technique still exists in the world of textiles, but the drafting of this contract is difficult.
Caution! Last minute of the Court of Appeal of reference on 9 April 2009
New development in case law regarding commission-affiliation by the Court of Appeal of reference of 9 April 2009
In the Chattawak case, we recall a decision of the Cour de Cassation [French supreme court] on 26 February 2008 which had recognized the validity of the affiliation contract in a dispute where the Chattawak franchisees considered their "franchise commission-affiliation contract " should be reclassified as commercial agent contract and followed by the Court of Appeal of Paris of 13 September 2006, reversed by the said Cour de cassation.

Well, the Court of Appeal on 9 April 2009 (download the decision here) refused to submit to the decision of the Cour de Cassation of 26 February 2008 and hence continues to consider that the Chattawak contract should indeed be reclassified as a commercial agent contract.

The doubt remains on all contracts of commission-affiliation. This doubt continues to create uncertainty in the textile world.

In procedural law, it will be the come back from the ruling of the Court of Appeal in review on 9 April 2009 before the Cour de Cassation, which, to settle the dispute for good, will meet in a plenary assembly to give a leading ruling, since it will be finally given in last resort.

Anything can still happen and the contract of commission-affiliation remains still in doubt.

One may wonder the relevance of the arguments advanced by Chattawak’s lawyers!!!



Generic term that tries to combine all the different means of distribution.

Definition: it is the distribution of a product or service through an independent trader under a common brand. The Doubin law applies to this vast group.

But this name was given by scholars in search of Cartesianism!



Partnership is a "catch-all" term, which also means franchise, concession, trademark and / or trade sign license, or others.

The word partnership is often used to avoid using the word franchising in some areas where the word "franchise" has a negative image. But there are Franchise Exhibitions, not only in France but also worldwide. There is an exhibition every weekend somewhere in the world.

There is not to our knowledge any partnership, concession or cooperative exhibition.

In fact, it is the judge who has the sovereign power to qualify the nature of the contract. If in the contract of partnership the three elements of a franchise exist, ie a trademark license, transfer of know-how, continuing relationship, the judge will classify this agreement into a franchise.

Some have sought to theorize on the partnership. There is even a federation, the IREF, which is the partnership federation. But this attempt has not prospered and remained marginal.



Purchase contract, contract of sale, contracts for services, group purchasing ...

All these formulas already exist in commerce; it is necessary to refer to the Code of Commerce.



This formula is used mainly in the hotel business.

For example, the “Novotel” or “Ibis” franchisee invests in the construction of the hotel but does not manage it himself. It mandates the franchisor so that it manages it on its behalf the operation of the hotel.

The management mandate contract like the commission-affiliation contracts are often heckled in court. You will find below is the most recent case law.

The Court of Appeal of Angers had in a ruling dated 15 May 2007 questioned the management mandate of “B & B”: "the existence of an employment relationship does not depend on the willingness of the parties, or the name that they have given their agreement, but in fact the conditions in which the worker’s activity is exercised”.



Who has not heard of “Yoplait”, “Danone”, “Coca-Cola”, “Florette” ,...?

Industrial franchising can be defined as the possibility for an industrial to franchise:

a) his means of production (factory)
b) his distribution channels
c) his management and finance know-how

In international contracts to help some developing countries, some so-called 'turnkey plant’ agreements were signed.
Industrial franchising not only concedes the process of a turnkey plant conceded to the industrial franchisee, but also transfers distribution know-how (as a classic commercial franchise).

More global, industrial franchising transfers in reality a “turnkey operating account”.

In 1996, Olivier Gast had set up a franchise agreement with the industrial vacuum-packed “Florette” salads and an agricultural cooperative in Australia.

But this type of industrial franchising is still marginal.
However, it is not said that in the future with the high technology franchises (eg merchant websites), the spirit of the industrial franchising does not become popular again.



Some funds are currently inventing in Dubai a new form of franchising: speculative franchising.
Bursting with petro dollars, these funds seek to diversify their investments in intangible assets: brands, trade signs, master franchises ...

They buy master franchises worldwide and preferably a group of trademarks.
They pay substantial “masterfees” to franchisors and develop these trade signs by sub master franchising per continent and then sell back 4-5yrs later, on average, the entire" bouquet "or per tradesign, or to franchisor itself or to another investor. They speculate on the added value of each sub-master franchise or resold "bouquet".

Why not?
You should know that these funds are interested, in forms of private equity, in reaching the capital of the franchisor.

Here is a new form of stock exchange and speculation: the masterfranchise !

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