In Spain, franchise is understood as the commercial activity carried out by virtue of an agreement or contract by which one company, known as the franchisor, assigns to another, known as the franchisee, the right to operate its own system of marketing products or services.[1]
Until the 8th of December 2018, natural or legal persons -including companies from third countries, not established in Spain- intending to develop the activity of franchisor in the Spanish territory, had to notify the Register of Franchisors of the start of their activity, within three months as from its commencement. Failure to comply with this obligation of communicating the data and registration to the Register -provided for in Article 62 of Spanish Law 7/1996, of 15th January, on the Regulation of Retail Trade (“LOCM”) and in Royal Decree 201/2010, of 26th February, regulating the exercise of a commercial activity on a franchise basis and the communication of data to the Register of Franchisors (“RD 201/2010”)- constituted, according to Article 65.1.r) of said law, a serious infringement.
However, on the 8th December 2018, Royal Decree-Law 20/2018, of 7th December, on urgent measures to enhance economic competitiveness in the industry and commerce sector in Spain (“RD 20/2018”) was published in the Official State Gazette (B.O.E.) and came into force. This RD 20/2018 regulates a number of measures in order to enhance competitiveness in the industrial and commercial sectors, such as the limitation of loss-making sales or the suppression of Franchisor and Distance Selling Registers.
Thus, as far as the commerce sector is concerned, RD 20/2018 suppresses the Register of Franchisors, until then foreseen in Article 62 of the LOCM and regulated in RD 201/2010.
The telematic Register of Franchisors was launched in 2016, although the computer applications on which it was based had serious shortcomings, resulting in a complicated and unintuitive use and, ultimately, creating obstacles and demands for its users that had been overcome.
Likewise, the only information that this Register verified was the fact that the franchising company held the ownership or right of use of the trademark, a matter that was already covered by the Spanish Patent and Trademark Office. By contrast, the personnel of the Register did not confirm any other data communicated by franchisors.
In view of this, and in order to remove obstacles for companies, encourage economic activity and streamline resources, the Sole Derogatory Provision 1.a) and c) of RD 20/2018 expressly suppresses Article 65.1.r) of the LOCM -which qualified as a serious infringement the breach of the obligation to communicate the commencement of the activity to the Register of Franchisors and to annually update the data- as well as several provisions of RD 201/2010 -which regulated the Register of Franchisors-.
Conversely, the obligation of the franchisor to deliver to the future franchisee, at least 20 days prior to the signing of any franchise agreement or pre-agreement or any payment by the future franchisee to the franchisor, in writing, the necessary information so that the franchisee may freely and knowingly decide to join the franchise network, is maintained. This pre-contractual information shall contain, in particular, the main data identifying the franchisor, the description of the sector of activity of the franchised business, the content and characteristics of the franchise and its operation, the structure and extension of the network and any other essential elements of the franchise agreement. With regards to this obligation, the following article can be consulted: FRANCHISE CONTRACTS IN SPAIN: BREACH OF OBLIGATIONS.
Carla Villavicencio
Vilá Abogados
For more information, please contact:
28th December 2018
[1] Article 62.1 of Spanish Law 7/1996, of 15th January, on the Regulation of Retail Trade (“LOCM”)
