SPAIN: Modifications on the Franchise Regulation and the Registry of Franchisors (Introduced by Royal Decree 419/2006, April 7th, 2006).

These modifications can be summarised in the following points:

1. 1. Royal Decree 419/2006 introduces some modifications to the definition of franchise activity (art.2.1) referring it to a particular market. The definition of Franchise agreements is also clarified by including a list of activities that are not are considered (or not necessarily considered) as franchise. For instance, there will not be considered as franchise agreements the distribution contract, the manufacture licenses, the cession of registered trademarks to be used in a specific area, the transfer of technology and the transmission of a name or a commercial label. Franchise agreement is therefore defined as the agreement by which a specific company, the Franchisor, grants to another company, the Franchisee, in exchange of a direct or indirect financial compensation (or both) the right to operate a business or commercial activity previously developed with enough experience and success by the Franchisor, to commercialise some sort of products or services.

1. 1. The definition of the Master Franchise agreement has also been modified: this will be a contract by which a company, the Franchisor, grants to another one, the Master Franchisee, in exchange of a direct or indirect financial compensation (or both) the authorisation to conclude with third parties other franchise agreements, according to the system defined by the Franchisor and assuming the Master Franchisee the role of Franchisor in a specific market.

1. 1. The Regulation modifies the information to provide to the Registry of Franchisors. It will be necessary to specify the period in which the Franchisor is acting as a franchise and the number of owned and franchised establishments. The new Regulation also authorises to produce to the Registry on a voluntary basis some new sensitive information:
       
      • • The possession of a quality certificate.

       

      • • The acceptance of extrajudicial systems for solution of conflicts.

       

      • • The deontological codes of the company.

       

      • The acceptance of the arbitration system of consumption in relation to the complaints that the consumers may raise.
   2. The Regulation also modifies the process of inscription and update of the Registry data. It introduces the obligation for the Franchisor to send to the Registry a negative certificate even if there was not information to be updated and even if there were no new opened or closed establishments. It is important to underline that the Regulation introduces a penalty in case of breach of these obligations. This penalty will consist in the automatic cancellation of the Franchisor from the Registry of Franchisors.

1. Finally, the Regulation introduces a classification of Franchisors in the Registry creating a specific section for the “consolidated Franchisors” when they reach the two following conditions (art. 12):
    
   • • To have developed the activity during at least two years in 2 establishments;

    

   • • To have a minimum number of 4 establishments, two of which must be owned by the Franchisor.

    

Ignacio Alonso, IDI Country Expert for Spain.

The text of the mentioned Regulations can be found in the Legislation Section of the IDI website.