Law & Q&A

Ministry of Industry, Tourism and Commerce, BOE No. 63 of 13 March 2010, Reference: BOE-A-2010-4175

(Consolidated text, last amendment: 24 October 2019)

Franchising, carried out through franchise agreements or contracts, normally improves the distribution of products and the provision of services, since it allows franchisors to create a uniform distribution network through limited investments. This facilitates the entry of new competitors into the market, particularly in the case of small and medium-sized companies, with a consequent increase in inter-brand competition. At the same time, it enables independent retailers to set up businesses more quickly and, in principle, with a greater chance of success than if they had to do so without the franchisor’s experience and assistance, thus enabling them to compete more effectively with other distribution companies.

Franchise agreements can also benefit consumers and users by combining the advantages of a uniform distribution network with the existence of business operators interested in the efficient operation of their business.

Article 62 of Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade, governs the franchising system. Section 2 of Article 62 provides that individuals or legal entities that intend to carry out franchising activity in Spain must communicate their information within 3 months of the commencement of their activity and for information purposes only, to the Register that may be established by the relevant Administrations, which must be coordinated with the State Register. Also, section 3 of Article 62 specifies the information that the franchisor must deliver to the future franchisee so that he/she can decide upon, freely and with full knowledge of the facts, his/her joining the franchise network. Furthermore, this section states that the regulations will establish the other basic conditions for the franchising activity.

Currently, Royal Decree 1182/2008, of 11 July 2008, which establishes the basic organisational structure of the Ministry of Industry, Tourism and Trade, assigns the registration, control and monitoring of special national marketing methods and the duties provided under Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade to the General Directorate of Trade Policy.

EU law, and in particular two of its provisions, have been taken into account in the implementation of the aforementioned Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade. Firstly, the Single Exemption Regulation 2790/1999, of 22 December 1999 (Commission Regulation (EC) No. 2790/1999, of 22 December 1999 on the application of Article 81(3) of the EC Treaty to categories of vertical agreements and concerted practices), which repealed and replaced the previous block exemption regulation for franchise agreements (Commission Regulation (EEC) No. 4087/88 of 30 November 1988 on the application of Article 85(3) of the Treaty to categories of franchise agreements), and applies directly to franchise agreements affecting the EU and national markets. Also, Directive 2006/123/EC of the European Parliament and of the Council, of 12 December 2006, on services in the internal market (hereinafter, the Services Directive), has been taken into account to rationalise, simplify and remove unnecessary barriers to the access and provision of services, contributing to improving the regulation of the register that exists to date.

The regulation of the state register created in 1998 is further improved, which guarantees the centralisation of data relating to franchisors, for the purposes of information and advertising; and, to this end, the technical and coordination guidelines have been established between similar registries that may be established by the autonomous communities, under the principle of interoperability of registries and one-stop-shops provided for in the Services Directive.

In any case, the autonomous communities where the franchisors have their registered offices will be responsible for keeping the register, so that the proposals for registration, cancellation and revocation made by them will be accepted as binding.

The requirement for the register of franchisors is, among other reasons, required by the importance of having an up-to-date record of these companies, the commercial sector of which is undergoing strong growth in Spain.

The sole final provision of Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade, states that Article 62 constitutes civil and commercial legislation, and will apply generally as it is based on the exclusive authority of the State to regulate the content of private contract law, under Articles 149.1.6^a and 8^a of the Constitution.

Similarly, section 2 of Article 62 is considered a basic regulation, issued under Article 149.1.13.^a of the Constitution.

During the drafting of this provision, the autonomous communities and the sectors in question were consulted.

By virtue thereof, at the proposal of the Minister of Industry, Tourism and Commerce, prior approval of the Minister of the Presidency, in agreement with the Council of State and after deliberation by the Council of Ministers at its meeting held on 26 February 2010.

I DECREE

Title I - General Provisions

Art. 1. Purpose

The purpose of this provision is to establish the basic conditions to carry out the franchising activity.

Title II - Basic conditions for the carrying out of the franchising activity

Art. 2. Commercial activity in franchise regime

(1) For the purposes of this Royal Decree, a franchised commercial activity, as regulated in Article 62 of Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade, is defined as an activity which is carried out under a contract whereby one company, the franchisor, grants to another, the franchisee, in a given market, in exchange for direct or indirect financial consideration, or both, the right to operate a franchise, with respect to a business or commercial activity that the former has previously carried out with sufficient experience and success, to market certain types of products and services, and that includes, at a minimum:

1. The use of a common denomination or label or other intellectual or industrial property rights and a uniform presentation of the premises or means of transport that are the object of the contract.
2. The communication by the franchisor to the franchisee of technical knowledge or know- how, which must be his own, substantial and unique, and
3. The continuous provision by the franchisor to the franchisee of commercial or technical assistance, or both, during the term of the agreement; without prejudice to the supervisory powers that may be established contractually.

(2) A principal franchise or master franchise agreement is defined as an agreement under which one company, the franchisor, grants to the other, the principal franchisee, in consideration for direct or indirect financial compensation or both, the right to operate a franchise in order to conclude franchise agreements with third parties, the franchisees, in accordance with the system defined by the franchisor, with the principal franchisee assuming the role of franchisor in a given market.

(3) A commercial concession or exclusive distribution contract, whereby an enterprise undertakes to acquire normally branded products under certain terms from another entity that grants the enterprise a certain exclusivity in a certain area, and then resells those products also under certain conditions, as well as assisting the buyers of the products once the sale has been made, will not necessarily be considered a franchise.

(4) Neither shall any of the following legal relationships be considered franchises:

1. The granting of a manufacturing licence.
2. The assignment of a registered trademark for use in a certain area.
3. The transfer of technology.
4. The assignment of the use of a logo or commercial label.

Art. 3. Pre-contractual information to the potential franchisee

At least twenty working days prior to the signing of the franchise contract or pre-contract or the delivery by the prospective franchisee to the franchisor of any payment, the franchisor or principal franchisee shall provide the prospective franchisee with the following truthful and non-misleading information in writing:

1. Identification data of the franchisor: name or corporate name, registered office, as well as, in the case of a trading company, the equity capital stated in the most recent balance sheet, with a statement of whether it is fully paid up or in what proportion, and registration data in the Commercial Registry, where applicable. In the case of a principal franchisee, the above circumstances with respect to its own franchisor shall also be included.
2. Proof that the title of ownership or licence to use the trademark and distinctive signs of the franchisor has been granted for Spain and is in force, and proof of any legal appeals filed that may affect the ownership or use of the trademark, if any, stating, in any case, the duration of the licence.
3. A general description of the sector of activity that is the object of the franchise business, which shall include the most important data of the same.
4. The experience of the franchising company, which shall include, among other data, the date of establishment of the company, the main stages of its development and the growth of the franchised network.
5. Content and features of the franchise and its operations, which will include a general explanation of the system of the business that is the object of the franchise, the features of the know-how and of the permanent commercial or technical assistance that the franchisor will provide to its franchisees, as well as an estimate of the investments and expenses necessary for the start-up of a typical business. In the event that the franchisor provides the potential individual franchisee with forecasts of sales figures or operating results of the business, these must be based on sufficiently substantiated experiences or studies.
6. The structure and size of the network in Spain, which shall include the form of organisation of the franchise network and the number of establishments in Spain, distinguishing those operated directly by the franchisor from those operating under the franchise assignment regime, stating their location and the number of franchisees who have ceased to belong to the network in Spain in the last two years, specifying whether the termination occurred due to the expiration of the contractual term or other circumstances.
7. Essential elements of the franchise agreement, which will include the rights and obligations of the respective parties, the duration of the contract, the conditions of termination and, if applicable, of renewal thereof, economic considerations, exclusivity agreements, and limitations on the franchisee’s free use of the franchised business.

Art. 4. Franchisee’s Duty of Confidentiality

The franchisor may require that the prospective franchisee maintain confidentiality in respect of all the pre-contractual information that he receives or is going to receive from the franchisor.

Title III - Register of franchisors

Art. 5. to 12.

(Repealed).

First additional provision. Communication of data by the autonomous communities.

(Repealed).

Second additional provision. Data communicated directly to the register of franchisors of the Ministry of Industry, Tourism and Commerce.

(Repealed).

Third additional provision. No increase in public expenditure.

The provisions of this Royal Decree shall not give rise to an increase in State expenditure.

First transitory provision. Interoperability of franchisor registries.

(Repealed).

Second transitory provision. Transitional regime for the application of the sanctioning procedure in the absence of the communication of data.

(Repealed).

Sole repealing provision. Repeal of regulations.

As of the entry into force of this Royal Decree, the following regulations shall be repealed:

1. Royal Decree 2485/1998, of 13 November, implementing Article 62 of Law 7/1996, of 15 January 1996, on the Regulation of Retail Trade, regarding the regulation of the franchise system, and creating the Register of Franchisors.
2. Royal Decree 419/2006, of 7 April, amending Royal Decree 2485/1998, of 13 November, regarding the regulation of the franchise system and the register of franchisors.
3. All those provisions of equal or lower rank that conflict with the provisions of this Royal Decree.

First final provision. Nature of the regulation.

Articles 1, 2, 3 and 4 of the present royal decree are enacted under the protection of the provisions of Article 149.1.6.^a and 8.^a of the Constitution, which attributes exclusive authority in commercial legislation and civil legislation to the State.

The remaining provisions of this Royal Decree shall be considered basic regulations issued under Article 149.1.13.^a of the Constitution, which grants the State exclusive authority over the principles and coordination of the general planning of economic activity.

Second final provision. Power of implementation.

The Minister of Industry, Tourism and Commerce is authorised to enact, within the scope of his powers, the necessary provisions for the execution of the terms of this Royal Decree.

Third Final Provision. Entry into force.

This Royal Decree shall enter into force on the day following its publication in the “Official State Gazette”.

Granted in Madrid, 26 February 2010.