Franchising a business in Spain allows the franchisor, a natural or legal person, to develop and expand its business through investors (franchisees). To this end, the franchisor transfers the rights to use his brand and its operating and organisational methods. The franchise contract helps to formalise the duties and obligations of both parties. In Spain, the franchisor usually enjoys a privileged position before the franchisee. For that reason, many entrepreneurs decide to expand their commercial network by setting up franchises in our country, thus limiting their risk.
Advantages of franchising your business in Spain
- Franchising enhances the franchisor’s distribution of products and provision of services
- The franchise contract allows the franchisor to create a uniform distribution network with limited investments.
- The franchisor may incorporate penalty clauses for breach of non-competition or confidentiality terms in the franchise contract.
- Early termination of the franchise contract by the franchisee makes it possible to compensate the franchisor for loss of profit.
Franchising regulation in Spain
In Spain, the franchise contract lacks a specific regulation. Limited legal provisions set out some of the guidelines to follow.
This lack of legal specificity gives the franchisor a privileged role in front of the franchisee. His obligations are few, and he is usually the one who, following the parties’ wishes, draws up the franchise contract. As a result, most of the obligations and penalties fall on the franchisee, giving the franchisor a position of superiority.
Franchisor’s obligations
In general terms, the franchisor’s obligations are:
- Providing the franchisee with truthful information about the franchise (proving that it has a reputation that guarantees a stable and prosperous operation of the franchise)
- Having the trademark registered to assign and allow the franchisee to use the industrial property rights
- To have identified know-how on its business model and transmit it to the franchisee
- Providing technical and training assistance to the franchisee
- Respecting the area of exclusivity granted to the franchisee, not granting new franchises in the same territory
- Developing marketing campaigns to promote the brand and the franchised centres.
The number of franchises in Spain has grown steadily over the last 20 years. However, the friction between the parties has also increased. Hence the importance of relying on professional legal advice when franchising your business.
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