FRANCHISING IN SPAIN
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rticle 62 of the Law 7/1996 on Retail Trade (the Retail Trade Act), provides a definition of franchising as well as conditions for this legal regime in Spain. Furthermore, it led to the development of Royal Decree 2485/1998, which introduced in Spanish law an improvement on the notion of preliminary agreements in the franchise contract. This Law regulates, in general terms, the activity of retail trade providing what is understood to be “good commercial practices” that must apply to any franchisee operating as a retailer in the market and establishes a framework for the relationship between the franchisor and the intended franchisee. Franchisors Registry The General Board of Commercial Policy of the Minister of Industry, Tourism and Trade governs this special administrative Registry. Companies intending to develop franchising in Spain must be registered into the Registry prior to the beginning of any franchising activity, whether the company is a franchisor or a Master Franchisee. The following information must be registered with the Registry: • Commercial and economic information of the franchisor. • Industrial and intellectual property rights and/or the transfer of ownership or licenses to use such rights. • Description of the business: report of the activity, number of franchisees in the network, number of franchised and company owned outlets, as well as the franchisees that have ceased to belong to the network in Spain during the last two years. Disclaimer The inclusion of any article or advert does not constitute any form of endorsement or approval by Franchiseek. All submitted articles will be considered. We reserve the right to refuse any advertisement or article which we consider unsuitable. Whilst we make every effort to ensure all advertisements and articles are correct, Franchiseek, will not be held responsible for errors or omissions. © Franchiseek Ltd 2011 All rights reserved. No part of this magazine may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or using any information storage and retrieval system, without permission in writing from Franchiseek, except that brief passages may be quoted by a reviewer in a magazine, newspaper or broadcast review. This publication is designed to provide its readers with accurate and authoritative information with regards to the subject matter covered. If legal advice or other expert assistance is required, the services of a competent person should be sought.
The Master Franchisee must provide this information about his Franchisor and the term of the Master Franchise agreement. Non-compliance with this registry obligation is defined by Article 68.2 of the Retail Trade Act as an infringement, that gives rise to a fine that oscillates anywhere from 3,006 to 15,025. Disclosure of Pre-Contractual Information The franchisor must deliver in writing to the intended franchisee within a minimum of twenty days prior to the signing of a franchise agreement or pre-contract or prior to any payment to the franchisor, all the truthful and non-misleading information necessary to enable the franchisee to freely and knowingly decide on whether to incorporate into franchise network, that includes the following: • Franchisor identification information: registration 56 franchiseek international directory
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in the Franchisors Registry and Trade Registry; information on share capital retained on the last balance sheet, if it is totally paid out and in what proportion. • Certificate of ownership or license allowing the use of the trademarks and other Intellectual Property rights in Spain, including the term of the license. • Description of the sector of the franchise. • Franchisor experience. • Contents and characteristics of the franchise: including a description of the business, the knowhow, the continuing commercial or technical assistance and an estimate of the investment, costs and expenses necessary to start the business. • In case the franchisor delivers financial projections or an estimate of sales and/or profits, these must be based of supported experience or studies. • Structure and extension of the franchisor network in Spain. • Essential elements of the franchise agreement: rights or obligations of the parties, term of the agreement, conditions of renewal and termination, financial or economic clauses, exclusive territory clauses and limitations on the franchise business. • Duty of confidentiality: the franchisor can demand that the future franchisee maintains confidential all of the delivered pre-contractual information. The consequences of the failure to disclose the precontractual information includes an administrative fine up to 3,006 and can arise civil consequences against the franchisor. European Union Regulation The European Regulation 2790/1999 (Block Exemption) develops the regime of concerted practices and vertical agreements that had been excluded from the application of Article 81.3 of the Treaty of Rome. This Regulation is applicable to vertical agreements, defined as those practices that have been entered into by two or more companies that work on different levels of production or distribution and refer to the conditions for the acquiring, sale or resale of determined goods or services. It does not mention franchising in its text, although the guidelines that accompany it (points 35, 42, 43 and 199 to 201) www.franchiseek.com