E-Commerce vs Your Franchisees: Structuring the Network Website in France

Structuring a franchise network website in France without provoking your franchisees

A franchise network website in France is, in law, the franchisor's to run. Operating a merchant site for the whole network falls within the head of network's power, and the franchisee has no automatic veto over it. That legal starting point is also where the trouble begins. The moment the site starts selling — running promotions the franchisees cannot match, holding stock they cannot obtain, capturing customers inside their exclusive zones — the network's shared economics come apart, and the disputes follow. The question a foreign brand should ask before it launches is not whether it may operate an e-commerce channel, but how to structure it so that online sales strengthen the network rather than cannibalise the people who paid to join it.

This is a governance problem more than a technology problem. The franchise contract almost never settles the sensitive questions the site raises — who owns the customer data, how the online margin is shared, whether advertising royalties may fund the site, what becomes of the data and the customer reviews when the contract ends. Left to contractual freedom, those questions are answered by the stronger party. The disciplined response is to design a network-website charter that fixes them in advance, along the three lines the franchise relationship actually rests on: the franchisee's profitability, the loyalty of the partnership, and the franchisee's ownership of its own customer base.

The three pillars a franchise network website in France puts at risk

To measure the exposure, start with what a franchise is built on. The relationship tries to hold together two logics that pull against each other: the franchisee's independence on one side, the franchisor's assistance on the other. The franchisee commits in order to benefit from that assistance, but it does not surrender its status as an independent entrepreneur — it trades for its own account, and the franchisor's services are only a means of developing the franchisee's own business. Seen this way, the franchise rests on three pillars. Profitability, whose optimisation is the object of the contract. Loyalty, whose promotion is its spirit. Ownership, whose preservation is its purpose. E-commerce, badly handled, shakes all three at once.

Profitability matters to every trader, but it is a determining element in a franchise. A franchise is by definition a contract of reiteration: its essence is the transmission of know-how that has already proven itself. The franchisee acquires the keys to that know-how only in order to secure a competitive advantage on the market. Know-how is a necessary element of the contract, but it is not a sufficient one. The Cour de cassation has said so expressly — the expectation of gain is here a determining element of consent. It follows that a franchisor cannot compromise the profitability of its franchisee partner without departing from its own mission. Cannibalisation by the network site is not a peripheral commercial irritation; it strikes at the very thing the franchisee bargained for.

Loyalty carries a structural weight in a franchise that it does not carry in an ordinary contract. A franchise is a partnership sealed by a common interest; the network is the product of a collective dynamic. Loyalty is the cement of the confidence on which it depends, and no network prospers for long without a minimum of transparency and dialogue. The network must remain the place of a profitable cooperation, not of unfair competition waged by the head of network against its own members. Ownership, finally, is the reminder that franchisor and franchisees remain legally independent undertakings. The franchisee is neither an employee nor an agent; it operates for its own account, and the customer base it exploits is an element of the business it owns. The franchise contract is a vehicle of growth for the franchisee — it cannot become an instrument for capturing the franchisee's customers.

Why e-commerce and franchisees in France collide: the recurring grievances

Running a merchant site inside a network feeds anxieties that reach every dimension of the franchisee's activity. These are not abstract complaints; they recur, in the same terms, across sectors and across networks, and a foreign franchisor should expect to hear all of them once its site starts trading. They fall into five familiar categories.

What unites these grievances is a single fear: that the franchisee will be relegated to the rank of a shop window. Many consumers already treat physical shops as showrooms — they look, they discuss, they try things on, then they go home and buy online. The franchisees bear all the costs of the physical outlet, answer every question, absorb every complaint, and may then be left out of the profits from the sales made on the network site. No one invests tens of thousands of euros to become the franchisor's mere depositary. That is why the stakes are not only commercial: the franchise sector represents close to 80,000 points of sale and around 800,000 jobs, and a network that hollows out its own franchisees threatens all of it.

Exclusivity, passive sales and the online sales franchise network

The legal picture is uncomfortable for franchisees and comfortable for franchisors, which is precisely why a charter is needed to correct it. Whatever territorial exclusivity is granted, the franchisor keeps the power to set up a merchant site, and the creation of that site is not treated as the establishment of a point of sale within the protected territory. The Cour de cassation (Commercial Chamber) laid this down in 2006, and it has persisted in holding that a franchisor's operation of a merchant site does no harm to the exclusive zone granted to the franchisees. The consequence is stark: the franchisee bears the installation and running costs of a physical outlet while the franchisor collects the sales made online.

That solution was already questionable when it was first stated. The internet is not a territory wholly independent of the physical one — the two are not parallel realities but complementary ones — and the position has become untenable as online commerce has exploded. In economic fact, the franchisee exploits a catchment area that the franchisor, in law, ought not to exploit without disloyalty. It is no answer to say that exclusivity does not form part of the essence of a franchise; that objection takes no account of the economic reality. The practical lesson is that the contract, not the case law, has to protect the franchisee — which means negotiating a specific clause on the network site rather than relying on the courts.

On the franchisees' side of the ledger, the one point that clearly runs in their favour is the right to sell online themselves. Online sales are analysed in competition law as passive sales, and a franchisee cannot in principle be prohibited from operating its own merchant site. The guidelines that accompanied the earlier block exemption already stated, at point 52, that each distributor must be authorised to sell the contract goods over the internet; the Court of Justice of the EU confirmed in Pierre Fabre (Case C-439/09, 13 October 2011) that partitioning distribution channels may be anticompetitive and is prohibited on that account; and the rule is now codified in Regulation (EU) 2022/720 of 10 May 2022, which replaced Regulation (EU) No 330/2010 of 20 April 2010 with effect from 1 June 2022. In practice, though, a franchisee's own site remains rare to the point of illusory: the franchisor can always impose image-protection standards, and its requirements are often so exacting that they discourage the franchisee; and the franchisee joined precisely to benefit from a collective dynamic of which the network site is a spearhead.

Where French law falls short on the franchise network website in France

French positive law is, on this subject, both incomplete and unbalanced — and understanding both defects is what tells a franchisor which questions its charter has to answer. The system is first incomplete: it hands to the will of the parties, and therefore to the law of the stronger, the settlement of sensitive questions raised by digitalisation. How is the franchisee guaranteed the benefit of its catchment area? How is the profit from online sales to be shared? May the advertising royalties that the contract charges to the franchisee be used to fund the creation and operation of the network site? May the franchisor reserve the power to direct internet users towards one unit of the network rather than another? Who manages the customer data gathered through the site? What becomes of that data at the end of the contract, and what becomes of the customer reviews? A handful of contracts try to strike a balance; most do not. Without guardrails, contractual freedom produces serious imbalances that ruin the three pillars — profitability, loyalty and ownership alike.

The system is unbalanced because it gives the franchisor a licence to operate the network site in its exclusive interest, while the franchisees' freedom to have a site of their own is theoretical. The scales tip almost entirely one way: almost everything on the franchisor's side, almost nothing on the franchisee's. It is already open to challenge that the case law lets the franchisor profit from data about its franchisees' customers simply because that data passes through the network site. The very possibility of running a site in disregard of the franchisees' exclusive or catchment zones amounts to a plain denial of the franchisee's property right. About the most the courts will concede is that the franchisor answers to third parties for faults connected with the operation of the site — which is the bare minimum.

No special statute is devoted to the digitalisation of franchising. French competition-practices guidance issued in 2021 went no further than to suggest that the operation of the network site must contribute to the franchisees' economic success — and did not develop the point much beyond that. Some trial judges have grasped the problem and have held that a franchisor must renegotiate in good faith the terms of a partnership whose balance is upset by the growth of online commerce, if only to prevent the network site from siphoning off the franchisees' customers — an application of the duty to perform the contract in good faith under Article 1104 of the Civil Code, reinforced by Article 1194. But it is difficult to secure the position of every franchisee on a few isolated decisions. That is the gap a network-website charter is built to fill.

Preserving franchisee profitability in the online sales franchise network

The first imperative the charter must guarantee is the franchisee's profitability. The franchisor's operation of a merchant site erodes that profitability on two fronts at once: it encroaches on the catchment area the franchisee exploits, and it typically organises no participation, or only a meagre one, in the profits from online commerce. Both fronts have to be addressed — the area protected and a share of the online margin organised.

On the second front, the logic is simple. Sales made by the franchisor through the network site to customers who belong to the franchisee's catchment area necessarily represent lost earnings for that franchisee. Nothing justifies depriving the franchisee of turnover connected to its own customer base. The franchisor should therefore pay over to the franchisee the proceeds of sales concluded with customers in the franchisee's catchment area, and may deduct from that payment only the incompressible costs it had to incur to process those sales — IT costs, transport costs, logistics costs, and the like. Where more precise arrangements cannot be imposed, the franchisor should at the very least be bound to render a detailed and regular account. Transparency is in any event the best route to greater loyalty between the parties.

This is not a matter of generosity; it is a matter of preserving the object of the contract. If the franchisee is left to run a fitting room and an after-sales desk while the franchisor books the sale, the expectation of gain that determined the franchisee's consent has been defeated, and the franchisor has departed from its mission. A well-drafted revenue-share clause converts a source of daily conflict into a shared incentive to grow the channel.

Loyalty and transparency in an e-commerce and franchisees France arrangement

The second imperative is loyalty, and digitalisation raises the demand for it. Two measures follow. The first is to impose reasonable transparency between franchisor and franchisees. The second is to prohibit any unfair competition by the franchisor against its own network.

On transparency, the network site can only be managed by the franchisor — which is a burden, but also a power, and both can give rise to conduct that loyalty condemns. Too many franchisors fund the creation and running of the site out of the advertising royalties, often without the franchisees knowing. If words mean anything, advertising royalties must be applied only to advertising expenditure. A franchisor cannot, for example, pay the whole cost of an employee assigned to managing the site out of the advertising royalties. The same discipline that governs advertising royalties generally applies here: sums collected for advertising must be spent on advertising, on pain of masking an unjustified enrichment, and a regular accounting is required — failing which the franchisee may ask the court to sequester the royalties or may suspend payment on the basis of the exception of non-performance. Beyond the royalties, some franchisors exploit the information passing through the site to direct internet users towards one unit or another with no regard to the franchisees' zones. Here too the franchisor should owe a regular and precise duty of transparency: all the determining data connected with online commerce must be communicated to the franchisees to the exact extent that it is capable of bearing, directly or indirectly, on the profitability of their outlets.

On unfair competition, the network site cannot be allowed to give the franchisor an advantage in its product or service offer. The franchisees must be able to offer customers the same products or services available on the network site, to obtain supply so as to offer the same range as the site, and to run the same promotional operations as those available on the site. A site that outstocks, undercuts and out-promotes the very franchisees who carry the network's fixed costs is not a shared tool; it is a lever of unfair competition inside the network, and it corrodes the loyalty that holds the network together.

Ownership of the customer base and the franchise network website in France

The third imperative is the protection of the franchisee's ownership of its customer base. As a new distribution channel whose management belongs to the franchisor alone, the network site is a danger to the franchisees: some franchisors use the information passing through the site to capture part of the customer base tied to their franchisees' zones. The charter must do two things at once — guarantee the franchisees the benefit of their own customer data, and forbid the franchisor from diverting that data.

Three practices should be firmly denounced as unlawful. The franchisor must not keep, for its own account, the data relating to customers who belong to the franchisee's zone. It must not transfer the data relating to a franchisee's customers without that franchisee's express consent. And it must communicate to the franchisee all the data it gathers about the customers and footfall belonging to the franchisee's zone. These are not drafting niceties. The customer base is an element of the business the franchisee owns, and a contract that lets the franchisor divert it denies the franchisee's property outright. A network site is not a licence to expropriate the goodwill the franchisee has built.

Customer reviews and e-reputation on the franchise network website

Online reputation deserves a protection of its own, because it has become a crucial datum of commerce. Many internet users agree to order online only because they are reassured by consulting reviews, especially where those reviews are certified by an independent body. Reviews are thus an ever-growing element of customer attraction. Some franchise contracts already address the point by requiring franchisees to use a provider that guarantees the reliability of the reviews posted online — but that does not exhaust the difficulty. The real question is who owns the reviews, and it arises inevitably at the end of the contract.

There is only one defensible answer. Because the franchisee alone dealt with the customer and served that customer satisfactorily, and because the franchisee operates a business at its own risk as an independent trader, the franchisee must retain a right over those reviews. That right imposes itself all the more strongly because the franchisee continues the same activity after the franchise ends. Any clause whose object or effect is to deprive the franchisee of that right — a clause stripping the franchisee of its reviews at the close of the contract in particular — should be deemed unwritten. A charter that respects this principle treats e-reputation as an asset of the outlet that built it, not as network property the franchisor may confiscate on departure.

Building a network-website charter for your franchise network website in France

The practical output of everything above is a single instrument: a network-website charter, negotiated into the franchise contract or annexed to it, that settles in advance the questions the general law leaves open. It converts the three imperatives — profitability, loyalty, ownership — into concrete obligations, and it does so before the site launches, when the parties can still agree. A charter should settle at least the following points.

Frequently asked questions about a franchise network website in France

Can a franchisor operate a merchant website that competes with its own franchisees in France?

Yes, in the current state of the law. Operating a network merchant site falls within the franchisor's power, and the Cour de cassation has held that creating such a site is not equivalent to establishing a point of sale within a franchisee's protected territory. The problem is that this leaves the franchisee bearing the costs of a physical outlet while the franchisor collects the online sales. The remedy is contractual: negotiate a network-website charter that protects the catchment area and shares the online proceeds.

Does a franchisor selling online inside my exclusive territory breach my exclusivity?

The case law does not treat the franchisor's online sales as a breach of the exclusive zone, which many regard as untenable given that the internet and the physical territory are complementary, not parallel. Because the courts will not protect the franchisee here, the protection has to be written into the contract — a clause entitling the franchisee to the proceeds of, or a commission on, online sales to customers in its zone.

Can a franchisor use advertising royalties to pay for the network website?

Advertising royalties should be applied only to advertising expenditure. Using them to fund the creation, staffing or operation of the network site — for instance to pay an employee dedicated to managing the site — is not a legitimate use, and the franchisee can require a regular accounting, seek sequestration of the royalties from a court, or suspend payment on the basis of the exception of non-performance.

Who owns the customer data collected through the franchise network website?

The customer base is an element of the business the franchisee owns. A franchisor should not retain the data of customers in the franchisee's zone for its own account, should not transfer it without the franchisee's express consent, and should communicate to the franchisee all customer and footfall data for that zone. A contract that lets the franchisor divert this data denies the franchisee's ownership.

Can a franchisee be stopped from selling online in France?

No. Online sales are analysed as passive sales, and a franchisee cannot in principle be prohibited from operating its own merchant site — a rule confirmed in Pierre Fabre and codified in Regulation (EU) 2022/720. In practice, image-protection standards and the pull of the network site make a franchisee's own site rare, but an outright ban is unlawful.

What happens to customer reviews when the franchise contract ends?

Because the franchisee alone served the customer and operates its business at its own risk, and because it continues the same activity after the franchise ends, the franchisee must retain a right over the reviews attached to its outlet. Any clause whose object or effect is to deprive the franchisee of that right, especially at the end of the contract, should be deemed unwritten.

Is a franchisor obliged to renegotiate the contract because of e-commerce?

Some trial courts have held that a franchisor must renegotiate in good faith the terms of a partnership whose balance is upset by the growth of online commerce, so that the network site does not siphon off the franchisees' customers — an application of the good-faith duty in Article 1104 of the Civil Code, reinforced by Article 1194. But these are isolated decisions, which is precisely why a charter agreed in advance is safer than reliance on litigation.

What should a network-website charter for a French franchise contain?

At a minimum: protection of the catchment area with a share of online proceeds net of incompressible costs; parity of products, supply and promotions between the site and the outlets; advertising royalties ring-fenced to advertising; remuneration for imposed click-and-collect; customer-data governance barring retention or transfer without consent; recognition of the franchisee's right over its customer reviews; and rules on traffic routing and on the fate of data and reviews at contract end.

Key takeaways on the franchise network website in France

How our French lawyers can help with your franchise network website in France

We advise foreign franchisors on the design and the documentation of the network e-commerce channel, so that online sales grow the network instead of generating disputes with the people who invested in it. That work runs from auditing your existing franchise agreement for the gaps the general law leaves open, to drafting a network-website charter that fixes catchment-area protection, revenue sharing, parity of offer and promotions, the ring-fencing of advertising royalties, click-and-collect, customer-data governance and the ownership of customer reviews — and to aligning all of it with the EU vertical block exemption.

We also act for franchisees confronting a site that undercuts their margin, outstocks their shelves, imposes unpaid click-and-collect or sells into their territory, and we advise on the remedies available where the franchisor's conduct crosses into unfair competition or the diversion of goodwill.

This article is for general information only. It does not constitute legal advice. The treatment of a franchise network website in France turns on the exact wording of the franchise agreement, the sector, the territory and the applicable EU competition rules. Contact our French lawyers for qualified advice before launching, joining or restructuring a network e-commerce channel.