France: The intangible elements of the franchise


published on 16 February 2024 | reading time approx. 8 minutes

When setting up a franchise network, a number of factors need to come together to give substance to and protect a commercial “concept”. At the heart of these factors are the trademark and the know-how, which are sometimes overlooked by franchisors who are not specialists in the field. Poorly designed or poorly managed Trademark; poorly defined, poorly protected or poorly communicated know-how: the consequences of a rough management of these assets can be terrible for the validity of the network.

This article is part of the article series “Franchising”. It is a cross border collaboration and is intended to highlight the key elements of a franchising agreement in selected countries. To the article series “Franchising” »



The trademark is not just the original name chosen by the franchisor to name and identify its network and products. Above all, it is a title of ownership and therefore a strategic asset of the franchise, whose protection and value must be managed with the utmost rigor.

Many entrepreneurs who do not specialize in this field, neglect the steps involved in such management:
  • The difficult choice of a new, original and strong name, which stands out from pre-existing trademarks and other distinctive signs (and which has therefore been the subject of serious prior checks, to avoid disputes by third parties, as holders of prior rights).
  • A territorial strategy: is the sign intended to be extended abroad, immediately or in the medium term, in which case its choice is more complicated and the potentially troublesome prior rights are more numerous.
  • Single filings or with multiple variations, depending on the strength the franchisor wants to attach to its trademark and on the objectives of the network.
  • Sustainable management: overseeing ten-year renewals, responding to incidents raised by offices or third parties, developing its trademark and making new registrations, if necessary, etc.
  • Actual exploitation: A trademark must be exploited, especially when it is the main element of attraction of a franchise. In addition to the role of the owner, the agreements signed with the franchisees must detail precisely their obligations in this regard, in order to bring the trademark to life and support the development of the network. The same is true of the communication around the network, driven by the originality and novelty of a trademark and its products, and which gradually contributes – we hope – to the notoriety of the trademark and the solidity of the franchise.
  • An active defense of the trademark: this involves setting up an intensive legal monitoring to be alerted and to react in the event of the appearance of competing distinctive signs, identical or similar. It is also a question of having an active policy to fight against trademark infringements (formal notices, oppositions, infringement or invalidity actions; cybersquatting, etc.).
  • Trademark valuation: especially when it comes to franchising, since this asset is an essential unifying element of the network. This valuation, at different stages of the network's life, is often neglected, due to the intangible nature of the trademark, even though it is a major asset.
  • The perception of the trademark as one of the intangible components of the network, along with know-how, in particular. It is a global strategy for framing and protecting a concept, which differs from a simple trademark license. Case law is regularly led to reclassify a license agreement as a franchise agreement and vice versa.[1]
Also, in order to properly qualify and consolidate this general framework, the acts constituting the network, and in particular the franchise agreement, must properly organize the rules relating to the protection and exploitation of the trademark and of the know-how.


As the most intangible element of the intangibles, know-how is not an “intellectual property” right, but a simple legal fact of “possession of information”, protected essentially by the secrecy that its holders will arrange around it.

It is not specific to franchising, of course, but is of particular importance in this context, since, although unique and secret, it is shared within the network and even distinguishes it from a simple partnership around a mere trademark. Its control and tightness are therefore key components of the characterization and viability of the network.

A broad definition

In practice, these are the confidential commercial methods[2] or technical methods of a company which, having contributed to its success, are communicated to its network of franchisees in return for payment, in particular through the commercial and technical assistance due to the latter.

Case law and European regulations have been able to give a fairly convergent definition of know-how: “a finalized set of practical, transferable, not immediately accessible, non-patented knowledge, resulting from the franchisor's experience, tested by him and conferring a competitive advantage on the person who masters it”.[3]

Beyond the jurisprudential and empirical definitions of know-how, the latter is now one of the components of “trade secret”, a concept that is broader and more economic than technical, regulated at the European level, but whose three criteria are quite similar to those of know-how. Thus, the French Law No. 2018-670 of 30 July 2018, transposing Directive No. 2016/943 on Trade Secrets, defines it as any information:
  • which is not, in itself or in the exact configuration and assembly of its elements, generally known or easily accessible to persons familiar with this type of information because of their sector of activity (more conventionally referred to as “secret” information)
  • has actual or potential commercial value because of its secret nature
  • is the subject of protective measures by its lawful holder that are reasonable, having regard to the circumstances, in order to preserve its secrecy.

Strict and sometimes neglected protection rules

While it is a strong element of the validity and enforceability of the franchise network, know-how is sometimes neglected by the franchisor, but also by franchisees who are not sufficiently aware.

On the franchisor's side, it is rarely identified with the necessary rigor, in other words rarely formulated, described and documented in a complete and operational manner. This difficulty is also found in litigation or during contractual negotiation, when it is a question of establishing the existence, extent and communication of an alleged know-how. It is too often confused with the mere existence of the trademark, which is not enough.

On the franchisor's side again, the effective transfer of know-how to franchisees is a fundamental obligation, so as to allow its operational implementation within the network. In particular, the franchisor must prepare and keep detailed proof of this communication.

As an “obligation of result”, the lack of communication or incomplete communication can obviously generate disputes between the two parties, and threaten the validity of the franchise agreement. 

This obligation is not only one-off, when a franchisee enters the network, but continues, in particular through the parallel obligation of training. In particular, the franchisor is free to develop its know-how (along with its trademark), provided that this does not cause inappropriate disruption to the very concept of the network, as franchisees are naturally reluctant to change a method or modify a trademark that has contributed to the success of a franchise. In this case, the franchisor must not only be concerned with the objective justification of such a choice, but also anticipate and organize the transition to a new version of its know-how, both through internal information and training, and through appropriate public communication, with the objective of not threatening the fundamentals and sustainability of the franchise.

On both the franchisor and franchisee side, its secrecy is not always taken seriously and organized enough.
On the one hand, it is not enough to call a piece of information “know-how” for it to really fit into the criteria for defining this legal notion. Too much of the information so qualified is actually already described in various public sources, or is so obvious that franchisees could discover it on their own without much effort. As a result, the validity of such know-how would be fragile in a court of law, and by extension the network.

On the other hand, both franchisors and franchisees do not always take the necessary protective measures to sustain their concept. However, the consequences of leaking know-how can be serious, since once it has been made public it can no longer be “caught up” and the franchisor can only seek financial compensation, which is not his primary objective. So, the owner must genuinely organize this protection, both internally and with regard to the franchisees. It is therefore a question of taking strong technical and organizational measures, but also of correctly specifying these obligations in the contract, including a right to regular auditing. In particular, raising awareness among employees and managers is a key factor in the solidity of the secrecy of a know-how.

Finally, the know-how must have a genuinely substantial value on the relevant market. The know-how must include a set of elements that make up a real competitive advantage, for the franchisor and the franchisees, compared to the information available to competitors in the sector of activity in question.

This is often the most difficult element to establish, and therefore to prove, even if its characterization may result from a set of weak but converging indices, such as its actual experimentation by the franchisor[4] or the success of the network, and in general proof of the causal link between the actual use of the know-how and the results of the franchise.

The licensee must therefore identify and supervise its know-how, protect it by appropriate measures, communicate it to franchisees with strict and controlled protection requirements and above all ensure its application and compliance within the network.

Respect for know-how by the franchisee

As indicated, this compliance is first of all provided for in a precise manner in the provisions of the contract, imposing strong obligations on the franchisee in this area and naturally, in the first place, an obligation of detailed and controlled confidentiality.

A breach of this confidentiality will not only result in the immediate termination of the contract by the franchisee, but also to an order to compensate the franchisor for the damage caused. This loss is often substantial, given that it is generally impossible to make up for the disclosure of secret information, and secrecy is a fundamental element of the franchise.[5]

Another possible failure is the failure of the franchisee to implement the know-how, in which case the franchisee is liable and risks termination of the contract. However, the franchisor must provide proof of this failure, based in particular on the documentation of the know-how and on the actual practices of the rest of the network. To this end, it is essential that the contract includes a right to regular audits, as well as an obligation on the part of the franchisee to provide strict information, for example about any customer complaints or incidents relating to the application of a method or process.

Challenging know-how

Franchisees in dispute with their franchisor are sometimes tempted to contest the very existence of the know-how associated with the franchise (in particular the triviality of the supposedly exclusive and secret information), or the effectiveness of its communication. Since they bear the burden of proof, it is first up to them to establish that their allegations are well-founded.

Faced with the possible beginnings of proof, it is then up to the franchisor, for his part, to establish the existence and/or communication of this know-how. Firstly, by proving the existence of duly protected documentation, a guide, a manual or a digital tool defining the content of this knowledge.[6] The passage of time can also provide evidence: a franchisee abusively contesting a piece of know-how after 20 years without the slightest challenge, the franchisor's long-standing membership of the French Franchise Federation, and therefore of its code of ethics, the network's overall profitability over several years, etc.

Failing this, the absence of know-how or its effective and continuous communication to franchisees may lead to the nullity of the franchise contract or even the disappearance of the network[7], with an obligation to return the sums paid by the franchisee under this agreement. However, the courts are still very cautious in this respect, particularly if the dispute arises extremely late.[8] Instead, some courts reclassify the contract as a contract for work and services, thereby excluding the obligation to make financial restitution.

Furthermore, if the franchisor has not succeeded in keeping its know-how secret throughout the term of the franchise, in addition to terminating the contract, it risks being ordered to compensate the franchisee for any loss suffered as a result.


In conclusion, if the franchisor wishes to guarantee the validity of his franchise network, he must follow rigorous good practice in order to ensure the protection of the intangible elements of his concept, and in particular the know-how, an essential component of this advantageous but fragile legal framework:
  • Genuine strategy for registering, managing and promoting the brand
  • Implementation of strong legal, technical and organizational protection measures
  • Inclusion of rigorous and demanding clauses in the franchise contract
  • Effective and comprehensive communication of know-how to franchisees, including renewed training and awareness of these issues
  • Preservation of evidence relating to these different stages of identification, protection, communication and exploitation of the trademark and know-how
  • Organization of controls, audits and regular exchanges with franchisees, in order to ensure compliance and effective implementation of the trademark and know-how.
Unfortunately, these good practices are not always known or implemented, thus undermining the validity and success of the network.

[1] See here: Grenoble Court of Appeal, March 3, 2022, No. 19/02810: JurisData No. 2022-006276
[2] See here: CJEU, 28 Jan. 1986, aff. 161/84, Pronuptia
[3] See here: Paris Court of Appeal, May 31, 2017, n° 15/13702, prev. – See also Cass. Com., June 8, 2017, No. 15-22.318; and also Article 1(g) of VBER Regulation No 330/2010
[4] See here: Paris Court of Appeal, January 9, 2019, No. 16/21425
[5] See here: Court of Appeal of Nancy, 14 Oct. 2020, No. 19/01736
[6] See here: Paris Court of Appeal, Pole 5, Chamber 4, May 22, 2019 - n° 17/05279
[7] See here: Court of Appeal of Chambéry, 1st Chamber, 3 October 2023, n° 21/00142
[8] See here: See note 4
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