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Franchise Guide

Pre-contractual information

• The franchisee chooses his network based on information he receives and quite frequently  most of this information comes from the franchisor. This information must therefore be accurate, honest and complete enough for the franchisee to be able to decide with full knowledge of the facts.
• The franchisee must also be protected against his potential tendency to “dream” and to make up his mind without having all the useful elements. Lastly, even though this is becoming increasingly rare, bad franchisors or ill-intentioned persons must be prevented from seeking to make the franchisee decide on an inaccurate and overly optimistic basis.
• Every country does not yet have laws covering pre-contractual information but a large number are considering such a law taking as an example the American laws and the French Law of 31st December 1989, termed the Doubin Law, or Law 2485/1998 of Nov 13th, 1998 in Spain. In the USA, the document the franchisor must hand over to the franchisee is designated by the initials U F O C. In France, it is designated by the letters D I P.

• To prevent “crafty people” saying their system is not a franchise in order not to have to comply with the legislation on the information given to the candidate before a franchise contract is signed, countries have a tendency to draw on the French law, which applies alike to franchises and to other networks between independent entities.
• To simplify matters, we will say that the obligation for pre-contractual information must or should apply as soon as the operation of a network is concerned, with an obligation for total or partial exclusivity for the exercise of the activity envisioned in the contract. Jurisprudence has a tendency to consider that more and more networks must comply and this is quite normal since it is a matter of protecting the franchisee.
• Carefully check on the legislation in your own country.  

• Name of franchisor, address, capital (and registration data on Special Franchisors' Register in Spain)
• Certification of ownership of right to use in the country the brand concerned.
• Description of activity and the sector where it operates.
• Experience of franchise company, including establishing date, main stages in its evolution and network expansion information.
• Conditions of the franchise, including main features of know-how and the assistance and training that the franchisor commits to the franchisee, initial investment and figures from a documented foreseen P&L account.
• Structure of network in the country, including number of units (owned by franchisor and operated by franchisees), and number of franchisees that have left the system in the country during last 12 months in France and last years in Spain.
• Main features and conditions of franchise agreement

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