Location-Gérance: Using Business Lease Management to Stage a Gradual Transfer

Selling a business in France is rarely a single transaction on a single day. For many business owners, the real challenge is not finding a buyer but managing the handover without destroying what has been built. Location-gérance — best translated as business lease management or managed business lease — answers precisely this question. It allows the owner of a fonds de commerce (the French concept covering goodwill, trade name, customer base, equipment, and lease rights, broadly equivalent to a going-concern business) to entrust its operation to a locataire-gérant (tenant-manager) for a defined period, before a possible outright sale.

The arrangement is governed by Articles L144-1 to L144-13 of the French Commercial Code. Several of its rules — mandatory publication, joint liability for debts, creditor protection — catch sellers off guard. This article sets out the practical framework so that location-gérance serves a transmission rather than complicating it.

A location-gérance arrangement lets the owner of a fonds de commerce hand its operation to a locataire-gérant, who runs it at their own risk in exchange for a redevance (lease fee) freely agreed between the parties. It can precede an outright sale and, in that context, functions as a staged transfer tool.

Location-gérance (sometimes called gérance libre, or free management) is a contract under which the owner of a fonds de commerce — the loueur (lessor) — entrusts its operation to a locataire-gérant for a fixed or indefinite term. The locataire-gérant operates the business in their own name, bears the operating risks, and pays the loueur a periodic redevance.

This is neither an ordinary property lease nor a sale. The loueur retains ownership of the fonds. The locataire-gérant acquires a temporary right to operate it. That right is personal: the locataire-gérant cannot sub-let the management arrangement or assign the contract without the loueur's agreement.

To place this mechanism in the broader landscape of exit options, see Choosing the Right Transfer Method for Your Business and La cession de fonds de commerce.

No. That requirement no longer exists. The obligation to have operated the fonds for at least two years before placing it under location-gérance was repealed by loi n° 2019-744 of 19 July 2019, which abolished the former Article L144-3 of the Commercial Code. Since that reform, French law imposes no minimum prior operating period.

This change makes the arrangement more accessible, including in situations where an acquirer wants to test operations immediately after a recent acquisition or business creation.

The parties enjoy wide contractual freedom, but several points require careful verification before any agreement is signed.

The fonds must be identifiable and operational. Location-gérance covers an existing fonds de commerce: customer base, trade name, bail commercial (commercial lease), equipment, stock, and any brands or licences attached to the business. If the fonds is not clearly defined, the contract lacks a proper subject matter.

The bail commercial (commercial lease) must permit — or at least not prohibit — location-gérance. In practice this is the most common blocking point. Many commercial leases include strict permitted-use clauses or prohibit any form of sub-letting or management transfer without the landlord's prior written consent. The lease must be read carefully before anything is signed. If landlord consent is required, it must be obtained in writing.

Administrative licences must be verified. Certain trades — licensed premises, pharmacies, travel agencies — require personal authorisations that do not transfer automatically with the fonds. The locataire-gérant must hold, in their own name, any licence required to operate lawfully.

1. Review the bail commercial and, where necessary, obtain written consent from the landlord.
2. Define the scope of the fonds clearly: intangible assets, equipment, stock, contracts included or excluded.
3. Prepare a dated inventory of the fonds and equipment at the moment of handover.
4. Draft the location-gérance contract with a legal professional: duration, redevance, obligations of each party, exit conditions.
5. Confirm that the locataire-gérant holds the licences and qualifications needed to operate lawfully.
6. Publish a notice in a legally authorised publication within 15 days of signing the contract.
7. Assess whether any of the loueur's debts linked to the fonds could be accelerated following publication.
8. Put in place a regular monitoring mechanism: turnover, fonds condition, redevance payments, operational incidents.

Publication is mandatory and the deadline is tight. A notice must appear in a publication authorised to carry legal announcements within 15 days of the contract being signed. The same publication requirement applies when the contract ends.

This formality is not a bureaucratic footnote. It triggers a creditor-protection mechanism that has direct consequences for the loueur's liability.

This is the legal point most frequently underestimated by sellers.

Before publication of the notice, the loueur remains jointly and severally liable with the locataire-gérant for debts incurred in the operation of the fonds. That joint liability ends from the date the legal notice is published.

After publication, debts newly incurred by the locataire-gérant remain their sole responsibility. However, the law provides a further mechanism: within the three months following publication, a court may, at the request of any interested party, declare the loueur's debts relating to the fonds immediately due and payable if the location-gérance arrangement puts their recovery at risk.

This point is critical for sellers who carry supplier debts, tax liabilities, or social charges linked to the fonds. A poorly prepared transfer can inadvertently accelerate obligations.

The redevance is freely agreed between the parties. It can be a fixed amount, indexed to turnover, or a combination of both. In practice, turnover-linked fees align the interests of loueur and locataire-gérant: if the business grows, the loueur benefits; if it declines, the fee adjusts.

Illustrative example (to be adapted to each situation): a restaurant fonds generates monthly turnover of €30,000 in a normal trading period. The parties agree on a redevance of 8% of turnover excluding VAT, with a monthly floor of €1,500. In a month with €28,000 HT of sales, the redevance is €2,240. In a weaker month at €15,000 HT, the floor applies: €1,500. This mechanism protects the loueur from very low months while keeping the fee proportional to actual activity. These figures are purely illustrative and must be adapted to the specific fonds.

Tax treatment for the loueur: redevances received are taxable income. The applicable tax category depends on the loueur's legal status — individual, company subject to corporate tax, or other structure. For an individual who was personally operating the fonds, redevances will generally fall within the industrial and commercial profits category (BIC). This requires case-by-case analysis.

Tax treatment for the locataire-gérant: the redevance is a deductible operating expense, which is a tax advantage compared with outright purchase of the fonds, where the intangible elements are amortised gradually over time.

Location-gérance works well in specific configurations. It is not a universal answer.

It is useful when:

• the prospective buyer does not yet have the funds to purchase but can operate immediately;
• the seller wants to observe the incoming manager in real conditions before committing;
• the business relies heavily on customer relationships or local expertise, and a progressive handover is needed to protect its value;
• the buyer's bank financing is conditional on a period of confirmed trading results;
• the seller wants to step back from day-to-day operations without selling under time pressure.

It is less appropriate when:

• the bail commercial does not permit it or landlord consent is uncertain;
• the loueur carries debts linked to the fonds that could be accelerated after publication;
• the prospective locataire-gérant does not hold the required personal licences;
• neither party is in a position to formalise a precise contract and maintain regular oversight.

In the staged transfer files we work on, the most frequent difficulties fall into three categories.

Silent deterioration of the fonds. The locataire-gérant operates at their own risk, but if the customer base shrinks, equipment deteriorates without maintenance, or supplier relationships degrade, it is the fonds value that suffers — and ultimately the sale price. The loueur has every interest in building contractual reporting obligations into the agreement from day one: monthly turnover, customer retention data, stock condition, technical incidents.

Confusion of responsibilities. Third parties — customers, suppliers, public authorities — may not clearly understand who is operating the fonds. If the locataire-gérant inadvertently enters into commitments in the loueur's name, liability disputes follow.

Pressure on the bail commercial. If the locataire-gérant fails to comply with the terms of the commercial lease — permitted use, premises maintenance, insurance declarations — the landlord may take action, and it is often the loueur who bears the first consequences.

In the transmission files we handle, the cleanest arrangements combine the location-gérance contract with a binding promise of sale (promesse synallagmatique de vente) drafted simultaneously. The sale price can be fixed at the outset or determined by reference to results achieved during the management phase. A clear timeline is the third essential element.

This combination reduces uncertainty for the incoming manager and secures the exit for the seller. For the mechanics of the sale itself, see La cession de fonds de commerce and, where the corporate structure is involved, Cession de titres.

Location-gérance is a serious tool but a demanding one. These are the points we verify systematically before advising any client to use it.

• Read the bail commercial in full, not just the standard clauses.
• Assess the loueur's debts linked to the fonds and the risk of acceleration post-publication.
• Confirm the administrative licences the locataire-gérant needs to operate lawfully.
• Draft a contract tailored to the specific fonds, not a generic template.
• Prepare the legal publication file before signing to avoid losing time.
• Define a monitoring mechanism: reporting, access to accounts, key performance indicators.
• Plan the exit from the outset: sale of the fonds, termination, or renewal.

Important notice. This article is provided for information and awareness purposes only. It does not constitute personalised legal, tax, or accounting advice. The rules applicable to any specific situation depend on many factors — the nature of the fonds, the terms of the bail commercial, the parties' financial positions, existing debts, and required licences — all of which require case-by-case analysis. Consult a chartered accountant or lawyer before implementing a location-gérance arrangement. Updated May 2026 based on the law in force at that date (French Commercial Code, Articles L144-1 to L144-13; loi n° 2019-744 of 19 July 2019).