Journal of Accounting and Management Information Systems (JAMIS)

Several considerations on the non-competition clauses in the franchising contracts

Supp/2006 ,   p319..324

Charlotte ENE

Keywords:   franchise, contract, vertical agreements, know-how, non-competition clause


The franchise is a system for selling products, (performing) services or technologies, based on the close and continuous collaboration between enterprises which are distinct and independent from juridical and financial points of view – the Franchiser and the Franchisees.

The Franchiser grants to its Franchisees the right to exploit a business in accordance with the terms of the Franchiser and it imposes the obligation to respect the rules. The Franchiser has a well-known trademark and the know-how which had been tested and approved, allowing it to succeed on its market. Quite often, its objective is to develop quickly its network and it is not able to achieve the objective on its own.

In exchange for a direct or indirect financial contribution, the Franchisee is allowed to use the trademark, the know-how, the commercial and technical methods, the procedures etc. As a consequence, the Franchisee is a head of an enterprise that wants to be surrounded by competences and refuses the adventure.

Due to the nature of the franchise relation, from the moment of acquiring the franchise, the Franchisee obtains certain information which is transmitted confidentially (recipes, marketing techniques etc.). In order to maintain the confidential character of this information and to avoid the facile transformation of the Franchisee into a competitor, generally the franchising contracts contain quite elaborated arrangements on confidentiality and non-competition.

In addition to non-competition clauses, the franchising contract contains very often provisions which are meant to discourage the Franchisee from continuing its commercial enterprise out of the network to which it accedes.