Excerpt from the International Franchisor Handbook 2nd Edition. The Franchise Regulation in Spain.

November 20th, 2017 Posted by Articles 0 thoughts on “Excerpt from the International Franchisor Handbook 2nd Edition. The Franchise Regulation in Spain.”

The law that regulates franchise in Spain is the Royal decree 201/2010.

 

The relationship between franchisor and franchisees is based on the legal independence of their companies, limited by the framework of their agreement. Their relationships are independent, each one responds to the other for his contractual breaches.

 

Individuals or legal entities that intend to develop the franchising activity in Spanish territory are obliged to communicate their data to the Register of Franchisors within three months from the start of the activity.

The Spanish franchise legal system is quite similar to the own European Union system. The franchise is defined as a system of collaboration between two legally independent parties, linked to each other through a contract whereby one of the parties, the franchisor company yields, in exchange for some economic remuneration, the right to use its trademark And their “know-how” business, for a limited time and in a determined territory.

The franchise responds to the need for a constant renewal of the market offer, obliged by the unstoppable and increasing appearance of new competitors and the requirement to offer new benefits.

The franchise gets closer to the consumer through a well-understood specialization, that is focused on a better knowledge of the product and above all, a better service and attention to the consumer.

The franchise is also security, based on the creation of a network of stores that supports a whole distribution system and that determines the support of each of the components of the network-business with the others, all for simple logical reasons to be interested in gaining greater strength in the market.

The franchise ensures a minimum of profitability, the quality of the franchised product, its originality, and the knowledge already possessed by one of the parties – the franchisor – that offers the possibility to other people to join a business that implies a lower commercial risk Due to the experience of the franchisor operating chain. Today statistics show that traders who start their business individually, close 90% before a year of life, compared to 10% of closures in franchises.

In recent years, the franchise has become an important tool for entrepreneurs and for business developments. In fact, According to the last business results about franchising in Spain, we can appreciate an increase in the last years in spite of economic crisis.

In Spain, the new rules of the game of the global economy are developed in a particular scenario of relative weakness in domestic demand, a profound reduction margins resulting from the increase in areas, and, above all, with a labor market without the capacity to grow and give response to the needs of the population.

At present, the franchises register 9% of the retail sales and generate 13.5% of the employment of the sector, with almost 66,000 opened establishments and 1,232 chains, of which 30% has moved to the other countries.

It is true that the lack of credit, the decrease in consumption, the lack of support to entrepreneurs, the intrusiveness and the unfair competition have led into a growing standstill of the Spanish franchise. However, entrepreneurs have turned to internationalization, new technologies, new financing systems, search of financial instruments, currently to the bank credits opening, but mainly to the professionalization of the sector and its agents. All this efforts are reversing the trend and again the franchise activity is starting to be felt.

The Spanish legislation is circumscribed to article 62 of Ley 7/96, de 15 de enero de Ordenación de Comercio Minoristas, and especially to Real Decreto 201/2010, de 26 de febrero, which regulates the commercial activity in the franchise regime. Said Real Decreto additionally gathers the European Union law in regard to retail organizing, specifically Ruling 2790/99 and Directive 2006/123. In addition, Spanish Autonomous Communities have some legislative faculties regarding franchises, especially about franchisor registry. Again, said Decreto 201/2010 is the law that rules in detail the commercial activity in the franchise regime. It is a short and systematic law which defines the commercial activity in the franchise regime stating the criteria that allow differentiating between the franchise and the commercial license, the exclusive distribution right, the agency contract and the strict business opportunities, the mere trademark cession, the technology transfer and the manufacturing license. Additionally, the Real Decreto highlights that in order to be a franchise, the franchisor must have (i) the franchise identifying intellectual or industrial property rights, (ii) the franchisor must have an own know-how which must inform to the franchisee, and (iii) the obligation from the franchisor to render commercial and technical assistance. Said regulation is also strict in regard to the pre-contractual information that the franchisor must communicate to the potential franchisee, with a pre-contractual character. This information must  be real and without fraud. In the meanwhile the franchisee assumes the confidentiality duty.

The franchisors registry is created under the Dirección General de política comercial del Ministerio de Comercio. This registry is created as a public registry with administrative nature in which all natural or legal persons which pretend to develop in Spain the franchise activity must communicate its data. Franchisors established in other European Union member states that operate in a free rendering regime without a permanent establishment are exempt from this communication duty.

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