Franchising your business: documenting the local market

The success of your existing outlet does not prove that the same customer base exists elsewhere. Before offering your concept to an independent entrepreneur, document the market in their proposed location. This helps build a franchise network on verifiable information, rather than the assumption that the original outlet’s results will automatically be replicated.

1. Distinguish mandatory disclosure from commercial analysis

In France, franchising is not governed by a single legal framework. General contract law and competition law apply, alongside a specific pre-contractual disclosure obligation where the conditions of Article L. 330-3 of the French Commercial Code are met.

Introduced by the Act of 31 December 1989, known as the Doubin Law, this article covers arrangements that make a trade name, trade mark or trading identity available in return for an exclusive or near-exclusive commitment in relation to the business activity. It requires the disclosure of truthful information enabling the prospective franchisee to make an informed commitment.

Article R. 330-1 specifies the contents of the pre-contractual disclosure document, known in France as the DIP. This must include an overview of the general and local market for the products or services concerned, together with its prospects for development. The DIP and draft agreement must be provided at least twenty days before signing or, where applicable, before any advance payment covered by these rules.

A local market overview is not a full viability study. It describes the commercial environment. A site feasibility study examines in greater detail whether a specific project can attract its intended customers. The prospective franchisee must investigate this further, but that does not relieve the franchisor of its duty to provide the required information.

2. Define an area that reflects customer behaviour

Start by explaining what you are analysing. An entire municipality may be too broad an area for a neighbourhood shop, yet too narrow for a business drawing customers from several municipalities.

Choose an area based on observable factors: access, travel times, transport links, physical barriers, employment centres and shopping habits. Do not confuse this area of analysis with any exclusive territory defined in the franchise agreement: they serve different purposes.

Then prepare a fact sheet covering:

• the products or services being studied and the needs they meet;
• the resident population and, where relevant, customers visiting or passing through the area;
• the main direct competitors and alternative products or services;
• factors that could change demand, such as an urban development project or changing customer behaviour.

For each key piece of information, state its source, date and geographical scope. Public data, on-the-ground observations and local economic information can complement one another. Older data may still be useful, provided you make its age clear and do not present it as a current snapshot.

3. Examine the differences from your original outlet

Your first outlet provides useful insights, but it also has its own distinctive features. A loyal customer base built by the founder, an exceptional location or high tourist footfall may account for part of its performance.

Draw up a comparison table covering the original outlet and the proposed area. Compare customer profiles, purchasing occasions, competition, accessibility and seasonality. For each difference, identify a question to investigate rather than assuming a favourable conclusion.

For example, a business driven by lunchtime purchases from local employees cannot simply be transferred to a mainly residential neighbourhood without further analysis. You need to observe when customers are around and investigate local habits before inferring comparable demand.

Clearly separate facts, assumptions and unknowns. An announced housing development is not the same as residents already living there. The absence of visible competitors does not, on its own, demonstrate unmet demand.

4. Organise review and updates

Appoint someone to take responsibility for the local market file, even within a small team. They should gather the evidence, check its consistency and retain the version supplied to the prospective franchisee, together with its appendices and the date it was provided.

Encourage the prospective franchisee to test this information against their own site visits and advice from independent professionals. Record the questions raised and correct any errors identified. This collaboration must not become a blanket clause through which the franchisor seeks to disclaim its disclosure obligations.

Before signing, check whether any significant event has made the overview outdated. If there has been a material change, ask your legal adviser to review what additional information should be supplied and how this affects the pre-contractual timetable.

Key takeaway: prepare a dated, traceable and balanced file for each proposed location. An honest description of the local market helps prospective franchisees make a decision; it never amounts to a guarantee of success.