Franchisors: When do they have to register

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The law requires that the party seeking in Spain to develop the activity of transferring a franchise must communicate its data to the Register of Franchisors within 3 months from the start of the activity. Failure to comply with this obligation may involve sanctions between 3,001 and 15,025 euros.

However, before deciding to develop a franchise in Spain, franchisors (especially those coming from outside the European Union), will hold several “activities” such as market research, seeking franchisees, pre-contracts, confidentiality agreements, disclosure of pre-contractual information … Then, when does the activity start, ie, what is the starting moment for the three months delay for the Franchisor to register?

According to the norm, “franchise commercial activity ” is defined as the activity under a contract that gives a company the right to operate a business under a franchise system and under certain conditions.

As I said, in a franchise relationship there is a prior phase consisting of market research, development of business plans adapted to the country, development of templates… most of them even carried outside our country and not necessarily concluding with the “activity ” itself (franchisor may conclude, for example, that the activity is not viable or that is not the proper moment, or any other reason implying that the business is not concluded).

A second moment  may involve the active searching for potential franchisees to Spain and the beginning of a commercial relationship: promoting the franchise, participation in fairs, interviews, etc. In these cases franchisees may be interested in receiving more information, the signature of pre-contracts, letters of intent, confidentiality agreements will be signed, payments will be made, etc. all with regard to the development of the Franchise in Spain, but without having yet signed the franchise agreement. However, to the extent that the Register of Franchisors has an informative purpose of maintaining an updated franchisors census and that the potential franchisee may wish to compare all the data received with those declared to the Register, it seems reasonable to argue that the registration obligation arises from the moment the first potential franchisee signs any agreement, confidentiality agreement, compromise, letter of intent, etc. that can originate in the future the franchise agreement in Spain.

Ignacio Alonso

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