Franchising in France: setting limits on post-contract non-compete clauses

Turning an existing business into a franchise network means planning for the eventual departure of its future members. Can you prevent a former franchisee from running a competing business? Not through a blanket ban. In France, restrictions that apply after an agreement ends are tightly regulated. Before recruiting your first franchisee, identify what genuinely needs protecting and have the proposed clause checked for proportionality.

1. Distinguish between protecting know-how and restricting competition

A post-contract non-compete clause limits a franchisee’s ability to carry on a competing business after the agreement expires or is terminated. It differs from a non-compete obligation during the relationship and from confidentiality obligations, which prohibit the disclosure or unauthorised use of protected information.

A non-affiliation clause, meanwhile, targets membership of another branded network. Its label alone does not make it lawful: any restriction on commercial freedom must be assessed according to its actual effects.

For a prospective franchisor, the starting point is therefore not ‘how can I stop someone leaving to join a competitor?’ but ‘what know-how that I have shared would be at risk after they leave?’ Draw up a precise list: original processes, tried-and-tested commercial methods and distinctive ways of organising service delivery. Exclude general industry knowledge and the franchisee’s personal experience.

This analysis may show that a confidentiality obligation, combined with the return of documents and withdrawal of access rights, meets your needs better than a ban on competing. A non-compete clause should not compensate for poorly defined know-how.

2. Check the applicable French and European rules

France has no single statutory framework governing franchise agreements. They are subject, in particular, to general contract law, commercial law and competition law. However, certain rules governing distribution networks directly regulate post-contract restrictions.

Article L. 341-2 of the French Commercial Code concerns agreements falling within the scope of Article L. 341-1, including certain network relationships involving the operation of a retail shop. You should therefore not assume that all service franchises automatically fall within this regime.

Within that scope, a clause restricting an operator’s freedom to carry on business after the agreement ends is treated as unwritten unless the party relying on it demonstrates that all four of the following conditions are met:

• it concerns goods or services that compete with those covered by the agreement;
• it is limited to the land and premises from which the operator carried on the business during the agreement;
• it is indispensable to protecting substantial, specific and secret know-how transferred under the agreement;
• it lasts no longer than one year after the agreement expires or is terminated.

The EU Vertical Block Exemption Regulation 2022/720, particularly Article 5, also sets strict conditions for a post-contract non-compete obligation to benefit from the exemption. The absence of an exemption does not, in itself, mean that the obligation is automatically prohibited: it requires an individual assessment under competition law. These different checks make it important to obtain legal advice tailored to your business model.

3. Draft a proportionate restriction that you can justify

Avoid copying a clause from another network’s agreement. Start by describing the activities that genuinely compete with your business. Wording that prohibits ‘any directly or indirectly similar activity’ risks going beyond what is necessary to provide the protection sought.

Next, define the locations covered. Where Article L. 341-2 applies, a radius around the outlet or the whole of a former exclusive territory does not match the statutory limit to the land and premises from which the business operated.

Set out a clear start date and duration. Under this regime, one year is a maximum, not an automatically justified term. Consider whether a shorter restriction would suffice, taking into account how long the know-how remains useful.

At the same time, compile evidence explaining why the clause is necessary: what was actually shared, its non-public nature, the advantage it provides and the specific risk of its use in a competing business. Without that evidence, careful drafting alone will not guarantee effective protection.

4. Prepare for enforcement before the first agreement is signed

The clause should be understandable during pre-contract discussions, rather than coming to light only when a franchisee leaves. Where the conditions of Article L. 330-3 of the French Commercial Code, introduced by the Doubin Law, are met, the pre-contract disclosure document (known in France as the DIP) and draft agreement must be provided at least twenty days before signing or, where applicable, before any required advance payment.

Also prepare a separate exit procedure: removal of the network’s branding, return of confidential materials, withdrawal of access rights and a reminder of the obligations that remain in force. Do not confuse these measures with a general ban on continuing to run an independent business.

Key takeaway: before offering your agreement, identify the know-how to protect, check the applicable legislation and choose the narrowest restriction genuinely needed. Have both the clause and the evidence supporting its justification reviewed by a legal adviser.