Your first DIP: preparing to recruit franchisees in France

Turning your business into a franchise network means presenting your proposition without concealing its limitations. Before recruiting your first franchisee in France, prepare a pre-contractual disclosure document (known as a DIP) that is verifiable, up to date and consistent with the proposed agreement. This document is neither a sales brochure nor a promise of profitability: it must enable the prospective franchisee to make an informed decision.

1. Understand what the law actually requires

France has no single legal framework governing every aspect of franchising. General rules on contracts, intellectual property and competition apply. However, Article L. 330-3 of the French Commercial Code, introduced by the law of 31 December 1989 commonly known as the Doubin Law, imposes a specific pre-contractual disclosure obligation. Article R. 330-1 sets out the required content.

This obligation applies when a trade name, trade mark or trading identity is made available alongside a commitment to exclusivity or near-exclusivity in carrying on the business. It therefore does not depend simply on whether the agreement is labelled a ‘franchise agreement’.

Where these conditions are met, the DIP and draft agreement must be provided at least twenty days before the agreement is signed or, where applicable, before any payment required prior to signing is made. A payment to reserve a territory must not be used to circumvent this protection.

This period provides time for consideration before committing; it is not a general right to withdraw after signing. Have a lawyer review your recruitment process before requesting any commitment or payment.

2. Gather the documents for a business becoming a franchisor

For an established business, the challenge is often to distinguish its trading history from that of its new franchise network. Having operated several company-owned outlets does not mean you already have several franchisees.

Compile supporting evidence under the headings required by the regulations:

• Identity and experience: the company that will enter into the agreement, its registered office, legal form, share capital, registration details, bank details and the professional backgrounds of the relevant directors.
• Company history: its formation and key stages of development, clearly distinguishing company-owned outlets from franchised businesses.
• Trade mark rights: filing or registration details and, where necessary, information about the licence authorising use of the trade mark and the granting of rights to franchisees.
• Financial position: annual accounts for the two most recent financial years, in accordance with the requirements of the legislation.
• Network composition: a list of the businesses concerned and their contact details, agreement dates and the required information on departures during the previous year.

If no franchisee has yet signed, state this explicitly. If the company intended to enter into the franchise agreements has only just been formed, do not present your established business’s accounts as though they belonged to that company. Make clear what information is available and which entity it covers.

Assign each document a date, a source and a person responsible for keeping it up to date. This will help prevent the reuse of an old presentation that is no longer accurate.

3. Tailor the document to the prospective franchisee and their location

The DIP must include an overview of the general and local market for the products or services concerned, together with its development prospects. A standard national overview used for every prospective franchisee is therefore not enough to address the local market.

For each proposed location, gather dated information on customers, competitors and the commercial characteristics of the area. Distinguish observed facts from assumptions. This overview does not replace the market research that prospective franchisees need to carry out for their own projects.

The document must also specify the agreement’s duration, the conditions governing renewal, termination and transfer, and the scope of any exclusivity provisions. It must set out the nature and amount of expenditure and investment specific to the trading identity or brand that will be required before operations begin.

Financial projections are not a legally mandatory section of the DIP. If you provide them, they must rest on sound assumptions that you can explain. Do not simply apply the results of your original outlet to another town or city: rent, footfall, the operator’s remuneration and staffing costs may differ.

4. Document delivery and complete the final checks

Before sending the documents, compare the DIP, draft agreement and your sales messaging. The initial franchise fee, ongoing fees, training, support and territorial exclusivity must be presented consistently. Verbal promises should never go beyond the support you actually plan to provide.

Supply a clearly identifiable set of documents and retain evidence of receipt, recording the recipient, date, DIP version, draft agreement and annexes actually sent. A ticked box alone does not necessarily prove which documents were received.

Then prevent signing and the collection of any payment covered by the rules until the statutory period has elapsed. If material information changes in the meantime, seek legal advice on whether updated documents must be issued and a fresh waiting period observed.

Key takeaway: prepare a master document set, tailor it to each prospective franchisee and keep a record of its delivery. A reliable DIP lays the foundations for a relationship of trust within your future franchise network.