Is your Franchise Fit for France?
Séverine Baranowsky, editor, Franchise Directe
If you are a franchisor thinking about entering the French franchise market, there are certain things that you need to know. Here are several figures to give you an idea of what the market looks like: in 2008, there were 1,234 franchise brands and 49,094 franchise units in France.1
According to a survey of the French Franchise Federation (FFF), the same year, 10.3% of the franchise brands established in France were foreign ones. Amongst all the foreign franchises, American ones are the most popular. In 2009, 4,203 American companies were active in France,2 and there are now 37 American franchises and commission-based affiliations in the country.3
Within the hexagon, the biggest franchising industry is food franchising.4 It is therefore not surprising to see that McDonald’s came second in the list of the biggest franchises in France (with 998 franchises), according to a report published in 2008 on the Journal du Net website. Vival, a network of French grocery stores, came first with 1686 franchises. The second American franchise on the list was Century 21, a real estate franchise (with 922 franchises), which came third. It is also interesting to note that one of the twenty biggest franchise brands in France is Canadian: Ada, a low-cost car rental franchise, came 12th in the list.
As far as the legal situation of franchising in France is concerned, it is interesting to note that there is no legal definition of a franchise in French law. The French Franchise Federation uses the European Code of Ethics for Franchising’s definition of a franchise, which French courts use as a guide. So there is no codified mention of franchise agreements in French law and no government agencies specifically dedicated to the regulation of the buying and selling of franchises. At the same time, the General Directorate for Competition Policy, Consumer Affairs and Fraud Control, an administrative body within the Ministry of Economy and the Competition Council, an independent authority, is in charge of the competition law elements.5
The most famous law in French franchising is The Doubin Law, which “compels the franchisor to provide a range of information – which content is fixed by the edict – to the future franchisee which will inform his choice with full knowledge of the facts.”6 This information will be listed on the Document d'Informations Précontractuelles (DIP) that the future franchisee will receive at least twenty days before signing the contract.7
Beyond the regulation of French franchising, there are several things one should consider before entering the French market. Patrice Chaumont, head of franchisee funding at Modena Financial warned of the following problems often faced by American franchisors looking to grow in France, problems that all other foreign franchisors will have to face when trying to enter the French market:
- Some American concepts are sometimes not suitable to the French market.
- The language barrier, as documents provided by the franchisors are very often in English, while the DIP and contract have to be written in French.
- Some Americans are more interested in master franchises, which can be more complicated for getting funding.
- Reluctance from banks to provide funding, as it is not always easy for them to check the financial documents given by outside organizations.
- Occasional lack of opportunity for growth, as banks always analyze the structure of the main company set in France before talking about funding. According to him, most of these companies do not have what it takes to constitute a relevant case file.
However Chaumont concludes that in spite of all these drawbacks, several American franchises such as McDonald’s, Curves and Sign-A-Rama are enjoying success in France, which proves that the French market is open to foreign franchises8.
1According to the Fédération Française de la Franchise
2According to the Orbis database 2009
3Information provided by the Fédération Française de la Franchise
4According to a report published by Le Crédit Lyonnais on its website in 2008
5As seen on a report published in 2010 by Getting the Deal Through
6Quoted from a definition found on the Franchise Business Opportunities website
7As seen on the Bureaux et Commerces website
8Quoted from a personal interview with Mr Patrice Chaumont