Day: June 9, 2022

You should know that, as a franchisor, you are required to have your prospective franchisee sign a DIP—a pre-contractual information document. What are your obligations, and how can you make the most of this document to start your relationship with your franchisee on the right foot? Check out the explanations from the experts at Cerca! What is the DIP? The DIP, or pre-contractual information document, is based on the Doubin Act, which regulates organized business models. Enacted on December 31, 1989, this law allows the franchisor to ensure complete transparency with the franchisee candidate regarding details about the network, and enables the franchisee to make an informed decision and sign the contract with all relevant information in hand. “Any person who makes a trade name, trademark, or brand name available to another person, while requiring that person to commit to exclusivity or quasi--exclusivity in the conduct of their business, is required, prior to the signing of any contract entered into in the mutual interest of both parties, to provide the other party with a document containing truthful information, enabling them to enter into the agreement with full knowledge of the facts.” The law was subsequently codified in 2000 by ordinances under Article L 330-3 of the Commercial Code. What is the purpose of the Pre-Contractual Information Document (DIP) for you and your future franchisee? The Pre-Contractual Information Document allows you to present the franchise network from administrative, financial, legal, and contextual perspectives. It brings transparency to the relationship with your franchisee and provides them with the necessary information to sign the agreement with confidence. It describes the market in which the franchise location will operate. Reviewing and signing the pre-contractual document does not bind either party. Only the franchise agreement formalizes the franchisor-franchisee relationship and its terms.  Give your future franchisee time to review the document and consider their commitment. Even the slightest pressure could come across as misleading and would not work in your favor. Don’t wait until the last minute to provide it, and make sure you’re available to answer any questions they may have.  The franchise candidate should take this time to read the document thoroughly and fully understand everything it entails. Answer their questions clearly; this will only strengthen their trust. To reassure the candidate, don’t limit yourself to providing only the information required by law. Provide the future franchisee with everything that can help them make an informed decision. Supplement the document with details of the project as it stands at this stage. You can entrust the drafting of your DIP to the attorney who advises your network. This will ensure your document complies with legal requirements. Franchise experts can also assist you with this process. All the documents you provide to your prospective franchisee will also demonstrate your brand’s professionalism. Take care to prepare them properly! Your Obligations Regarding the DIP as a Franchisor The Doubin Law is clear: the DIP must contain all the information the franchisee needs to make a decision and sign the franchise agreement. It must therefore be provided to the franchisee at least 20 days before the contract is signed, as required by law. To be compliant, the pre-contractual document must include certain information, as specified in Article 1 of the Doubin Decree of April 1, 1991. The DIP must contain: information about the franchisor (headquarters address, nature of business, legal form, identity of the director(s), share capital); the franchisor’s registration number in the Trade and Companies Register (RCS) or the Trade Register; if applicable, the date and registration number of the trademark in the National Trademark Register; the network parent company’s bank accounts, limited to the five main accounts; the date the company was founded; an overview of its development and evidence of the director’s experience; a list of the companies that are part of the network, particularly those bound by the same type of contract as the one to be offered, along with their addresses; the date these contracts were entered into or renewed; if the network works with more than 50 companies, a list of those that left the network in the year prior to signing and the reason for termination of the contract, as well as all locations where the products or services covered by the contract are offered; the terms of the proposed contract: its term, its conditions for renewal, termination, or assignment, and the scope of exclusivity provisions. The DIP must also include appendices presenting: the annual financial statements for the last two fiscal years or the reports prepared for the last two fiscal years. If you fail to comply with the terms of the law, you face two main penalties: a fine for a 5th-class violation, the cancellation of the contract entered into with the candidate, and the restoration of the situation to its state prior to the contract’s signing. How can Cerca help you implement the DIP? Cerca is a web platform that will help streamline your candidate recruitment process. As soon as candidates show interest, a dedicated candidate portal is created where they can view all the steps and attached documents. To streamline the process, documents—including the DIP—can be signed directly online. The candidate accesses their portal, where you’ve uploaded the relevant documents. This way, the candidate feels guided through each step and can access the various documents at any time, from any device. The interface is customized to match your brand’s visual identity. This immerses the prospective franchisee in your brand’s world from the very start of the recruitment process. Drafting a document[…]