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| | Pre-contractual information | Why legislation on 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.
Area of application
- 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.
Content of a pre-contractual information document (example France and
Spain)
- 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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Franchise Information
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