What to consider before signing a franchise agreement in Spain
Expanding your business to Spain or entering the world of franchising can open exciting new doors. However, before you dive into signing a franchise agreement, it’s essential to understand how the legal aspects of franchising work in Spain. Essentially, Spain has its own set of regulations and requirements that can be quite different from the UK or US. To make sure you’re fully informed, here’s a breakdown of what you need to consider before putting pen to paper.
If you need expert advice on franchise agreements in Spain, our English-speaking solicitors are here to help. You can easily book a consultation via the form on our website, email us at info@gbabogados.co.uk, or reach out via WhatsApp or call us at +44 (0)20 3137 1320. We’ll be happy to guide you through the entire process!
What is a franchise agreement in Spain?
A franchise agreement is a contract between a brand owner (the franchisor) and someone who wants to open a business using that brand (the franchisee). This agreement lays out the rules and guidelines for how to set up and run a franchise location, making it easier for the franchisee to start their business without needing to invest a lot of money upfront.
In Spain, these franchise agreements are regulated by Royal Decree 201/2010 and Article 62 of the Retail Commerce Regulation Act 7/1996. These regulations help ensure that both the brand owner and the person opening the franchise understand their rights and responsibilities, making the process fair for everyone involved.
The pre-contractual disclosure requirement
Before signing a franchise agreement, there’s a pre-contractual disclosure requirement, which states that the franchisor must provide the franchisee with important information at least 20 working days in advance. This gives the franchisee enough time to understand the details and make an informed decision.
Some important things that need to be shared include:
- Who the franchisor is and how they’ve been in business
- How the franchise network is set up
- Rights to any trademarks or brand names
- All the costs and fees involved
Sharing this information upfront helps both the franchisor and franchisee avoid any confusion and ensures that both parties are clear on what to expect from the partnership.
Key clauses in a franchise agreement
This agreement is all about how you and the franchisor (or franchisee) will work together in the future. It clearly outlines what each of you can expect from the other, including what you’re responsible for and what your rights are. If you don’t fully understand these details now, it could lead to confusion or issues later on. So, let’s break down the key points.
Intellectual property and know-how
A key benefit of franchising for the franchisee is access to the franchisor’s intellectual property (IP), such as trademarks, logos, and the overall business model. However, it’s important to understand any limitations or restrictions on how you can use the IP, especially after the agreement ends. For the franchisor, protecting the brand’s IP is essential for ensuring consistent quality and reputation across the network.
Franchisor control
Franchisors often maintain a level of control to make sure that brand standards and operational guidelines are followed consistently across the network. This could involve regular inspections, audits, or even access to financial records to ensure that franchisees meet specific operational and financial standards.
Economic compensation
Franchise agreements typically include compensation terms that specify how the franchisor will be paid, often as a percentage of the franchisee’s sales or profits. This is so both parties are clear with these financial arrangements to avoid any future confusion or unnecessary disputes.
Exclusivity and non-competition
Exclusivity clauses are agreements that restrict where and how franchisees can run their businesses. Similarly, non-compete clauses prevent franchisees from starting or joining businesses that directly compete with the franchisor. These clauses safeguard the franchisor’s brand and make sure that franchisees are dedicated to the franchise system.
Right of first refusal
In some franchise agreements, the franchisor may have a right of first refusal, which means that if a franchisee wishes to sell their business, the franchisor has the first option to buy it before the franchisee sells it to an external buyer.
Franchise Registration in Spain
Under Royal Decree-Law 20/2018, franchisors are no longer required to register with the Spanish Franchisor Registry. While this may simplify some administrative processes, both franchisors and franchisees should ensure the franchisor’s reputation is well-established before putting pen to paper.
How our English-speaking lawyers can help
Navigating Spanish franchise laws can be tricky, especially when you’re not familiar with the local regulations. Whether you’re a franchisor or franchisee, having a clear understanding of the legal landscape is vital to protecting your investment and making way for a smooth relationship.
Our team at Gascón Bernabéu specialises in helping international clients from the US and UK navigate Spanish franchise agreements. We’ll help you understand the details of your franchise agreement and make sure that the terms are in your best interest and in line with Spanish law.
We tailor our services to your specific needs. To get the legal guidance you need, get in touch with our team of experts today for a no-obligation consultation. You can visit our website and fill out the contact form, email us at info@gbabogados.co.uk, or give us a call directly at +44 (0)20 3137 1320. We’re here to help you every step of the way.