Franchise Contract in Spain: Elements, Obligations and Dispute Resolution (2026) : Lexiel

The Franchise Agreement in Spain

A franchise agreement is a business collaboration arrangement whereby the franchisor grants the franchisee the right to operate a proven business system (know-how, brand, image, and methods) in exchange for financial consideration (an entry fee plus royalties). This type of agreement has no specific regulation under the Código Civil (Spanish Civil Code); its legal framework is built upon:

Royal Decree 201/2010, of 26 February, on the exercise of commercial franchising activity
Law 7/1996 on the Regulation of Retail Trade (LOCM; Ley de Ordenación del Comercio Minorista), Arts. 62–66
General contract law provisions (Civil Code) and the Unfair Competition Act (LCD; Ley de Competencia Desleal)
The Code of Ethics of the Spanish Franchisors Association (AEF; Asociación Española de Franquiciadores)

Pre-Contractual Disclosure Obligation (Art. 62 LOCM and Royal Decree 201/2010)

The 20-Day Period

The franchisor must provide the prospective franchisee with a pre-contractual disclosure document at least 20 days before the execution of the agreement or the payment of any sum of money. This is one of the most important rules in the sector.

Minimum Content of the DIP

The pre-contractual disclosure document (DIP, documento de información precontractual) must include:

Franchisor details (identity, incorporation, tax identification number, representatives)
Description of the business sector and the network
Essential terms of the agreements (duration, renewal, termination, territorial exclusivity)
Franchise network: current number of franchisees, outlets, and additions and departures over the past year
Essential elements of the franchise agreement
Structure and scope of the network in Spain and abroad

Consequences of Non-Compliance

Failure to meet the disclosure obligation, or late delivery of the DIP, entitles the franchisee to:

Void the agreement on grounds of a defect in consent (mistake or fraud; Art. 1265 of the Civil Code)
Claim damages (Supreme Court judgment of 29 January 2020: a franchisee who had entered into the agreement without receiving the required disclosure obtained termination of the contract plus reimbursement of the entry fee)

Elements of the Agreement

Entry Fee (Franchise Fee)

An upfront payment for access to the network, the know-how, and initial training. It is not a refundable deposit unless expressly agreed otherwise; its legal nature is that of a price paid for the grant of rights.

Royalties or Periodic Fees

Recurring payments (generally a percentage of gross sales or a fixed monthly amount) for the ongoing use of the brand, technical assistance, and the franchisor's services.

Know-How

The body of practical, unpatented, verified, and confidential knowledge transmitted by the franchisor. This is the most important element in characterising an agreement as a franchise (Supreme Court judgment of 5 October 2022).

Territorial Exclusivity

The agreement may grant the franchisee an exclusive territory within which the franchisor may not open its own outlets or award further franchises. In the absence of an express clause, exclusivity is not presumed.

Obligations of the Parties

Franchisor

Transfer the know-how and grant a licence to use the brand
Provide ongoing technical assistance (training, marketing, and support)
Maintain the uniformity and quality standards of the network
Refrain from competing directly within the franchisee's exclusive territory (if agreed)
Comply with the pre-contractual disclosure obligation (Royal Decree 201/2010)

Franchisee

Pay the entry fee and royalties within the agreed timeframes
Comply with brand standards and corporate identity guidelines
Meet minimum sales targets (if agreed, failure to do so may constitute grounds for termination)
Maintain confidentiality regarding the know-how (both during the contract and after its expiry)
Post-contractual non-compete obligation (typically 1–2 years within the relevant area, sector, and activity: enforceable provided it is limited in time and scope; Supreme Court judgment of 24 April 2018)

Duration, Renewal, and Termination

Duration

Franchise agreements are typically concluded for 5–10 years. Case law has rejected excessively short terms (1 year) that do not allow the franchisee to recoup their investment.

Renewal

Automatic renewal unless prior notice is given is the standard arrangement. A franchisor who refuses to renew without justified cause may be liable for wrongful termination if the franchisee had reasonable expectations of continuity (Supreme Court judgment of 8 September 2016).

Termination

Grounds for terminating the agreement include:

Material breach by either party (Art. 1124 of the Civil Code)
Failure to meet minimum targets (if stipulated as a termination condition)
Change of ownership of the franchisee without authorisation
Insolvency or entry into concurso de acreedores (Spanish insolvency proceedings)
Serious breach of brand identity or confidentiality obligations

Common Disputes

Failure to provide pre-contractual disclosure: the franchisee challenges the agreement on the grounds that the DIP was not provided, or was provided fewer than 20 days before signing
Royalty review: unilateral modification by the franchisor without an express contractual provisión
Breach of territorial exclusivity: opening of a company-owned outlet or granting of a new franchise within the franchisee's territory
Termination for non-payment of royalties: the franchisor terminates the agreement without having fulfilled its own assistance obligations (termination on grounds of reciprocal breach; Supreme Court judgment of 19 June 2019)
Post-contractual non-compete clause: validity and scope

Conclusion

A franchise agreement requires careful negotiation of the DIP, royalties, territory, brand standards, and grounds for termination. Failure to comply with the pre-contractual disclosure obligation is the most common avenue for a franchisee seeking to exit the network without penalty.

Lexiel enables users to search Supreme Court case law on franchise disputes, draft DIP documents or franchise agreements, and analyse exclusivity and termination clauses.