Buying a franchise in France: securing your commercial lease

Joining a franchise network is not enough to secure a suitable business location. Attractive premises can become a liability if the lease prohibits an activity required by the brand, imposes costly building works or commits the franchisee beyond their means. Before signing, review the lease and the franchise agreement together: they govern two separate relationships, but must both support the same business venture.

1. Check that the premises genuinely allow you to operate the concept

The permitted use clause in the lease defines the activities the tenant may carry out on the premises. It must cover what you will actually offer, rather than just a broadly similar business category. A food shop offering on-site tastings, takeaway sales and delivery requires different checks from a shop selling only packaged products.

Ask the franchisor for a written description of the essential activities, equipment and fit-out requirements. Compare this with:

• the draft lease and any amendments;
• the building’s co-ownership regulations, where applicable;
• planning rules and the permissions required;
• the accessibility and safety requirements applicable to premises open to the public.

The franchisor’s approval of the location does not replace any required permission. Installing an extraction system or signage, or altering a façade, may require several separate approvals. Confirm that these can be obtained before commissioning the work.

If the planned activity falls outside the lease’s permitted use, negotiate an amendment before committing. Do not assume that a broader use will automatically be approved after opening.

2. Calculate the cost of the lease beyond the advertised rent

To compare two properties, work out the total cost of occupation. In addition to rent, you may need to pay service charges, certain taxes, insurance, a security deposit, professional fees and fit-out costs. Also distinguish between a lease entry premium (pas-de-porte), which may be payable to the landlord at the outset, and the price paid for the leasehold interest (droit au bail), usually paid to the outgoing tenant when the lease is assigned.

Ask for the precise, exhaustive list of categories of charges, taxes and levies specified in the lease, together with details of how they are allocated. For premises already in use, also request the latest service charge statements and any available information on past and planned works.

France’s statutory commercial lease regime regulates this allocation. For leases entered into or renewed since 5 November 2014, Article R. 145-35 of the French Commercial Code prohibits landlords from passing on to tenants, among other things, the cost of major repairs covered by Article 606 of the French Civil Code and the professional fees associated with those repairs. However, not every expense described as ‘building works’ falls within this category.

Clarify who will pay for each alteration needed to accommodate the concept: electrical installations, air conditioning, accessibility improvements, the shopfront or extraction system. Check the rent indexation clause too. An affordable starting rent does not guarantee stable costs throughout your occupation.

3. Align the contract terms and plan your exit

A commercial lease governed by France’s statutory regime normally has a minimum term of nine years. In principle, the tenant can terminate it at the end of each three-year period, subject to the applicable notice requirements and formalities. Exceptions exist, particularly for certain types of premises or leases, so have any clause removing this right reviewed.

The franchise agreement may expire on a different date. The end of the franchise agreement does not automatically end the lease. You could therefore remain liable for rent without being able to continue using the brand.

Draw up a combined timetable covering:

• the lease’s termination dates and deadlines for serving notice;
• the expiry date of the franchise agreement and any notice period for non-renewal;
• the repayment period for fit-out finance;
• obligations to reinstate the premises or remove branding.

The right to renew the lease, subject to certain conditions, protects the business tenant. If the landlord refuses renewal, the tenant may be entitled to compensation for non-renewal, unless a statutory exception applies. This right does not, however, guarantee renewal of the franchise agreement or that the rent will remain unchanged.

4. Coordinate signing without committing too early

In France, franchising is governed, among other things, by general contract law and pre-contractual disclosure rules. The framework introduced by the Doubin Law, codified in Articles L. 330-3 and R. 330-1 of the French Commercial Code, requires, where its conditions apply, the pre-contractual disclosure document and draft agreement to be provided at least twenty days before signing or making an advance payment covered by these rules.

This waiting period does not automatically protect you against signing a lease too soon. With a legal professional, negotiate appropriate conditions precedent covering finance, execution of the franchise agreement, essential permissions and approval of the works. Each condition should specify its deadline, the supporting evidence required and the consequences if it is not fulfilled, particularly for any money already paid.

Key takeaway: before making any binding commitment, have three elements checked together: the permitted activity, the full cost of the premises and an exit timetable compatible with the franchise agreement.