Franchise agreement (RO: contractual de franciza, FR: le contrat de franchise) = a legal contract between a franchisor and franchisee, where the franchisor gives the right of exploitation of their know-how in exchange of a fee (payment for the right to enter and periodic royalties). A franchise agreement contains three elements: an intellectual property license, a transfer of know-how and technical and commercial assistance. The intellectual property right license implies the transmission of distinctive signs, such as company name, trade name and brand name since the customer is attached to the brand of the product.

The franchisee undertakes an obligation of confidentiality regarding the know-how; he must not disclose it, even after the termination of the contract. The European Regulation no.330 / 2010 on Vertical Restraints and its Guidelines defines the know-how according to three criteria: it must be substantial, identified, secret. The franchisor is obliged to assist the franchisee throughout the duration of the contract. This assistance takes place before the creation of the company and also throughout the execution of the contract.

The mandatory elements in the franchise agreement are: the rights and obligations of both parties; the goods and/or services provided to the franchisee; the financial conditions for the franchisee; the conditions of transfer and transmission; the term of the contract and renewal conditions (if any); the conditions of use (by the franchisee) of the distinctive signs of the franchise; the franchisor's right to change his franchise concept; the termination clauses; the specific clauses  for the termination of the contract before the due date.

Useful links

Legislation - Commission Regulation (EEC) No 4087/88 of 30 November 1988 on the application of Article 85 (3) of the Treaty to categories of franchise agreements [English]

Organisations and associations - International Franchise Association - Fédération  française de la franchise - Fédération européenne de la franchise -  World Franchise Council - Mouvement des entreprises de France

Case Law  - Fundamentals 201: the 7 most significant franchise cases of all time [English]

Online publications - Affuso L., Newbery D., 2001, Investment, reprocurement and franchise contract length in the Βritish railway industry [English] - Aidt T. S., Jensen P.S., 2010, Workers of the World, Unite! Franchise Extensions and the Threat of Revolution in Europe, 1820-1938 [English]


M. Abel, 2013, The Law and Regulation of Franchising in the EU, Edward Elgar Publishing [English]

M. Malaurie-Vignal, 2015, Droit de la distribution, Sirey [French]

By Madalina Enea