French terms you need to understand before buying a business in France

By Valérie Aston on 8 December 2016 · Viewed 7482 times · Questions

You have decided to move to France and are considering buying an existing French business in order to quickly get into work and make a living. This is an interesting option and there are many businesses to be sold in the tourism trade such as cafés, restaurants, camping sites, hotels, tour companies etc.

My main advice is to quickly get familiar with the French vocabulary related to buying a business in France, as you may otherwise get stuck in tricky situations.

Bilan, bail commercial, fonds de commerce, compromis de vente, fonds de commerce, are a few words that you will not learn in your French class, but that are essential to buy or build a business in France. If you are looking at creating a shop in France, this will also apply to you, so read on.

Bilan - loss and profit account

You have seen a few offers of businesses for sale in France, you have visited a few with an estate agent or notaire and you are now intereted in a couple of them. Now is the time to ask for a copy of the loss and profit accounts called bilan. As a potential buyer, you are entitled to a copy of the last three years' loss and profit accounts. Reading through the bilan will enable you to analyse the real value of the business, as well as ways to improve its profitability, i.e. fixed charges, margin, etc.

French accountants and bank managers conseillers bancaires professionnels are used to value businesses for their potential customers and to point out at hidden problems, so don't hesitate to make an appointment with them to discuss the business you wish to buy. You may get a few useful arguments to help you negociate down the selling price.

Bail commercial - premises leasing contract 

If you want to buy a business in France without buying the property, also called walls in French les murs, you will be renting the business premises to a landlord propriétaire. In this situation, you will need a copy of the leasing contract bail commercial, in order to know who owns the property, what are the renewal dates, who will bare the maintenance costs and which activities can be carried out within the premises. This is particularly important within the food trade, as bail commercial might limit what you can do... for instance a bar may not be allowed to prepare and serve food.

Fonds de commerce

In France, fonds de commerce refers to the business activity and does not include the property or walls where the activity is carried out. So you may be buying a shoe shop, but you also need to look into securing the bail commercial, which enables you to carry this activity in its actual location. Most businesses in France are sold without the walls.

Fonds de commerce includes the customer base clientèle, the trading name nom commercial/enseigne, a priority right over the premises leasing contract called droit au bail, the equipment needed for the activity le matériel (ask for a detailed list to be added to the purchase contract to avoid any surprises), stock and work contracts (employees remain with the new business owner).

Compromis de vente - business sale agreement

Compromis de vente is the legal document that you will sign with the notaire or estate agent agent immobilier, once you have agreed on a price. It is best to request a draft, called projet de compromis de vente, before signing this document. This will enable you to read all the clauses with your own notaire or accountant. It is also best to add your own conditions to protect yourself. For instance "on condition of securing a bank loan of xxx xxx euros". This is often done by French entrepreneurs, in order to let them come out of the deal, if no bank follows them to finance the business.

It is key to get professional advice on all these legal contracts, as they are pretty unreable even for French business entrepreneurs! Get help from a notaire, lawyer and an accountant.

Start Business in France can also help you understand how to buy a business in France and what you should be looking out for on these contracts. Join the forum to ask you questions. 

Valerie Lemiere: Start Business in France

About the author: Valérie Aston

I've been helping people who want to start or already have a small business set up in France since 2009. After graduating from a Master of Business Administration (MBA) degree, I worked as a senior marketing consultant in the UK and France for various International companies. I worked as a conseillère en création d'entreprises (senior business advisor) for BGE here in France and run this independent business on a daily basis.