Can you sell or transfer a French franchise?
You can sell or transfer a French franchise, but not freely: the franchise contract is concluded in consideration of the person (intuitu personae), so it cannot change hands without the consent of the other party. A franchisee that wants to sell its business, and a franchisor that wants to reorganise its network, are each free to do so - subject to the agreement of their counterpart and, since 2016, to a writing without which the assignment is void.
The franchise contract can circulate on either side. The franchisee "passing the hand" sells its goodwill (fonds de commerce) or its shares and hopes the buyer will step into the franchise; the franchisor absorbed by, or sold to, another entity brings a new party in at the head of the network. Each route runs into the same two requirements - the will of the parties and their good faith - and each is channelled by two clauses the contract almost always contains: the approval clause (clause d'agrément) and the pre-emption clause (clause de préemption). This article sets out how a French franchise is transferred, how those two clauses work and where they become abusive, and what happens to liabilities once the transfer is done.
A French franchise transfers only with the consent of the party that stays in the contract, and the assignment must be in writing on pain of nullity (Article 1216 of the Civil Code). The agrément and pre-emption clauses regulate how that consent is given and priced.
Selling, buying or restructuring a French franchise?
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Selling, buying or restructuring a French franchise?
Handled by Petroff Avocats, French registered lawyers · Paris Bar (Toque #C2396)
Why a French franchise cannot be transferred freely: the intuitu personae rule
The reason a French franchise cannot simply be sold on is that it is an intuitu personae contract - entered into in consideration of the identity of the parties. The franchisor chose this franchisee to reproduce its concept; the franchisee chose this franchisor for its know-how and its network. Neither can be replaced without agreement. The rule is drawn from the general law of contract: the assignment of a contract requires the consent of the party that is ceded (the cédé). That consent is needed whether the transfer is initiated by the franchisee selling its business or by the franchisor restructuring - a merger-absorption, a partial contribution of assets - because in each case the identity of a contracting party changes.
Consent may be express or tacit, and it may be given at the time of the proposed transfer or in advance in a clause of the original contract. An advance consent given in a clause is convenient, but in franchising it is fragile when it operates in one direction only: the Paris Court of Appeal (in a decision of 5 January 2022) treated a clause installing a unilateral intuitu personae - binding the franchisee to accept any change of franchisor while reserving the franchisor's control over any change of franchisee - as a source of significant imbalance between the parties' rights and obligations. Where the franchisee has not consented to a change of franchisor, the contract may be terminated, and some courts reason instead in terms of lapse (caducité).
A transfer needs both the will of the parties (the ceded party's consent) and their good faith in exercising the clauses that control the transfer. A one-way intuitu personae clause - the franchisor free to change hands, the franchisee locked in - is exactly the kind of asymmetry a French court will strike.
The agrément clause: the franchisor's right to approve the buyer of a French franchise
The approval clause (clause d'agrément) is the mechanism by which the franchisor controls who enters its network when a franchisee sells. It is legitimate: because the franchise is intuitu personae and the franchisor's whole interest is in a network of operators fit to reproduce the concept, the franchisor is entitled to reserve a right of scrutiny over any assignment of the franchisee's business or of the shares in the franchisee's company. Reciprocally, the franchisee has an interest in the identity of its franchisor, which is why a well-drafted contract makes the scrutiny run both ways.
The clause has a limit, and it is where most disputes arise. French courts do not, in the absence of a clause requiring it, compel a franchisor to give reasons for refusing approval - but they do sanction the abuse of the right to refuse. Where the contract obliges the franchisor to examine a proposed transfer fairly and carefully, the Cour de cassation has held that a refusal of approval must be justified by imperatives connected to the safeguard of the franchisor's legitimate commercial interests, and must be reasoned, so that the seller can verify that the decision rested on a fair and careful examination rather than on arbitrariness. A franchisor who withholds approval to force the franchisee toward a different, cheaper exit, or to recover the territory for nothing, steps into abuse.
The prudent course is to write the duty to reason into the clause: the franchisor undertakes to examine the proposed buyer on objective and verifiable criteria, to decide within a fixed, short period, and to give reasons for any refusal. A clause of that shape secures the franchisor's control of the network while removing the arbitrariness that exposes an approval right to challenge.
The pre-emption clause: the franchisor's right of first refusal over a French franchise
The pre-emption clause (clause de préemption) gives the franchisor a right of first refusal: where the franchisee sells its goodwill or its shares, the franchisor may step in and acquire them itself, in priority to an outside buyer. Like the approval clause, it is a legitimate protection of the network - it lets the franchisor keep a strategic outlet, or prevent a competitor from acquiring one - and, like the approval clause, it becomes dangerous when it is used to strip value from the departing franchisee.
Two features keep a pre-emption clause on the right side of the line. First, timing: the franchisor's right to pre-empt should be exercisable only within a fixed and short window, so that the sale is not paralysed and the outside buyer is not scared off while the franchisor deliberates; a period of the order of one month is a reasonable maximum. Second, and more importantly, price: the clause must not allow the franchisor to substitute its own valuation for the price the franchisee has negotiated with its buyer. A pre-emption right that lets the franchisor acquire the business at a price it sets - rather than matching the negotiated price - operates to force a sale at an undervalue (à vil prix), and that is where it tips into abuse and significant imbalance.
A pre-emption clause that lets the franchisor revise the negotiated price downwards is the classic abusive version. The franchisor already gains from the exit - it can re-let the territory to a new franchisee for a fresh entry fee and new royalties - so a clause that also lets it buy the outgoing franchisee's business cheaply is a double advantage a court will scrutinise closely.
Agrément and pre-emption as "sensitive clauses": the significant-imbalance control
Approval and pre-emption clauses sit among the "sensitive clauses" of a French franchise, policed by the significant-imbalance control. Between professionals, Article L 442-1, I, 2° of the Commercial Code makes it a source of liability to subject a partner to obligations creating a significant imbalance in the parties' rights and obligations; and in an adhesion contract, Article 1171 of the Civil Code deems any non-negotiable clause creating such an imbalance unwritten (réputée non écrite), while Article 1170 strikes any clause that deprives an essential obligation of its substance. A franchise agreement is almost always drafted by the franchisor and is usually an adhesion contract, so these controls bear directly on the transfer clauses it contains.
The result is not that approval and pre-emption clauses are void - they are valid and useful - but that their modalities are tested for imbalance. A unilateral intuitu personae clause (the franchisor free to transfer, the franchisee bound to accept) has been treated as creating a significant imbalance. An approval right exercised arbitrarily, without objective criteria or reasons, and a pre-emption right that lets the franchisor set the price or drag out its decision, are the modalities most exposed. The safe design is reciprocal, reasoned and time-limited.
Approval and pre-emption clauses appear on the "grey" list in our analysis of abusive clauses in French franchise agreements, and the significant-imbalance test that governs them is set out there in full.
Selling to a buyer who will run the franchise: the disclosure duty re-triggers
Where a franchisee sells its business to a buyer who intends to continue under the network's sign, the transfer is not only a matter of approval and pre-emption - it re-triggers the pre-contractual disclosure obligation. The duty in the loi Doubin, now Article L 330-3 of the Commercial Code, applies not only to a first entry into the network but also on renewal and on assignment of the contract. The Cour de cassation (Commercial Chamber, 21 February 2012, no. 11-13.653) confirmed that a fresh disclosure document must be delivered to the assignee of a distribution business, so the incoming operator can commit with full knowledge of the network it is joining.
For the parties, that means a sale to an incoming franchisee should be sequenced so that the disclosure document and the draft contract reach the buyer in good time before it signs the new franchise. A transfer that ignores the disclosure duty leaves the new relationship exposed to the same nullity and damages risks as a defective entry. The disclosure content, the twenty-day rule and the sanctions are treated in full in our article on the loi Doubin and the pre-contractual disclosure document.
Transfer by the franchisor: change of franchisor, mergers and share deals
A French franchise can also be transferred from the franchisor's side, and the rules there are a frequent source of surprise for foreign networks reorganising across borders. The franchisor may transfer its network by assignment of the contracts, by merger-absorption or by partial contribution of assets - but a change of the franchisor as a contracting party requires the franchisees' consent, precisely because the contract is intuitu personae and the franchisees engaged in consideration of that franchisor's know-how.
A share deal is treated differently. Where the network changes hands by a transfer of control of the franchisor company - the shares change owner, but the legal person and the content of the contracts do not - the Cour de cassation has held that the franchisees' consent is not required, absent an express clause to the contrary, because the legal person remains the same. That reasoning is criticised, and a carefully drafted franchise will reserve the franchisees' position on a change of control just as the franchisor reserves its own position, through the approval clause, on a change of franchisee.
What the incoming franchisor cannot do is change the deal. When the contract circulates it continues unchanged, and its terms remain law for the new party: a new franchisor may not modify the economy of the contracts it has inherited. The Paris courts have applied this repeatedly, and the Lyon Court of Appeal (17 February 2005) held that a franchisor keeps the right to sell the network it has built only on the determining condition that it does not alter the economy of the ongoing franchise contracts or the legal and economic position of the franchisees. Where a network is sold as a way of winding the franchisees down - a sale followed by a succession of breaches, such as failing to maintain supply in quality and quantity or to run the promotional campaigns the contract requires - the resulting termination is imputable to the franchisor.
A franchisee's insolvency does not switch off the consent requirement. Although a court may order the judicial assignment of a business under Article L 642-7 of the Commercial Code, courts have held that a franchise is, by its nature, not freely assignable - its object is the transmission of a specific, secret know-how that only the franchisor can supply - so an incoming operator generally cannot be bound to the franchisor, or the franchisees to a new franchisor, without a fresh agreement.
Is your agrement or pre-emption clause abusive?
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Is your agrement or pre-emption clause abusive?
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After the transfer of a French franchise: liabilities, exceptions and the transferor's guarantee
Once a French franchise has been assigned, two questions decide who bears what: which defences the parties may raise against each other, and whether the transferor is released. Both are now settled by the Civil Code, and both reward careful drafting of the assignment.
On defences, Article 1216-2 of the Civil Code provides that the assignee (cessionnaire) may invoke against the ceded party the defences inherent in the debt - nullity, the defence of non-performance, termination, or set-off of connected debts - but not the defences personal to the transferor (cédant). The ceded party, for its part, may invoke against the assignee all the defences it could have raised against the transferor. In a franchise, that means an incoming franchisor takes the contract subject to the franchisee's existing grievances, and an incoming franchisee cannot escape defences attached to the contract itself.
On release, Article 1216-1 of the Civil Code provides that the assignment discharges the transferor for the future only if the ceded party has expressly consented to the release; failing that, and unless the contract provides otherwise, the transferor remains jointly and severally liable for the performance of the contract. A franchisor selling its network, or a franchisee assigning its contract, is therefore not automatically off the hook - an express release is needed, which makes the wording of the assignment clauses decisive.
Do not assume that assigning the franchise ends the transferor's exposure. Under Article 1216-1, the transferor stays jointly and severally liable unless the ceded party expressly consents to its release. Whether you are the outgoing franchisee or a restructuring franchisor, insist on an express release in the assignment.
Frequently asked questions about selling or transferring a French franchise
Yes, but not freely. Because the franchise is intuitu personae, the franchisee needs the franchisor's consent, usually channelled through an approval clause, and the assignment must be in writing on pain of nullity. The franchisor may also hold a pre-emption right allowing it to buy the business in priority.
It is a clause reserving the franchisor's right to approve the buyer of the franchisee's business or the new holder of its shares. It is valid, but a franchisor cannot exercise it arbitrarily: where the contract requires a fair examination, a refusal must be justified by the franchisor's legitimate commercial interests and reasoned, and the abuse of the right to refuse is sanctioned.
A pre-emption clause gives the franchisor a right of first refusal to acquire the franchisee's business. It becomes abusive where it lets the franchisor set or revise the price instead of matching the negotiated one, or where it has no fixed time limit - because it then forces a sale at an undervalue and creates a significant imbalance.
Not automatically: absent a clause requiring it, French courts do not compel the franchisor to give reasons. But they sanction the abuse of the right to refuse, and where the contract obliges a fair and careful examination, the refusal must be reasoned so the seller can verify it. The safe course is to write an objective-criteria, reasoned-refusal duty into the clause.
Yes, where the buyer will operate under the network's sign. The pre-contractual disclosure duty of Article L 330-3 applies on assignment as well as on entry and renewal, and the Cour de cassation (21 February 2012, no. 11-13.653) confirmed that a fresh disclosure document must be delivered to the assignee.
A change of the franchisor as a contracting party requires the franchisees' consent, because the contract is intuitu personae. A transfer of control of the franchisor company (a share deal) does not, absent an express clause, because the legal person is unchanged - though a well-drafted franchise reserves the franchisees' position in that case too. In all cases the new franchisor may not modify the economy of the ongoing contracts.
Only if the ceded party expressly consents to the release. Under Article 1216-1 of the Civil Code, the transferor otherwise remains jointly and severally liable for the performance of the contract unless the contract provides otherwise, so an express release should be obtained in the assignment.
Key takeaways on selling or transferring a French franchise
How our French lawyers can help you sell or transfer a French franchise
Selling or transferring a French franchise turns on the approval and pre-emption clauses and on the assignment mechanics - where value is protected or lost. We act for franchisees selling their business, for buyers stepping into a network, and for franchisors restructuring or reserving control over who enters it. We draft and negotiate the agrément, pre-emption and assignment clauses, manage the disclosure duty on transfer, and secure an express release so the transferor is not left jointly liable.
Discuss your matterThis article is for general information only. It does not constitute legal advice, and the transfer of a French franchise turns on the exact wording of the approval, pre-emption and assignment clauses and on the circumstances of the sale. Contact our French lawyers for qualified advice before selling, buying or restructuring a franchise in France.
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Selling or transferring a French franchise is possible, but never free: the contract is intuitu personae, so it cannot change hands without the other…
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