Franchise disputes: what to agree before you buy

Before joining a franchise network, it is worth knowing what will happen if a disagreement arises. It is not enough for the agreement to allow you to bring a claim: you need a workable procedure, clear deadlines and affordable costs. Reviewing these clauses before you buy helps protect your ability to defend your business without turning every issue into litigation.

1. Distinguish an operational issue from a formal claim

A problem with an app or a discrepancy in a payment calculation may start as an operational query. But if it remains unresolved, there must be a way to turn it into a documented claim.

Look for the following in the agreement and its schedules:

• Recipient: which company and address must receive notices.
• Valid method: email, an internal platform, burofax (a Spanish service providing certified proof of content and delivery) or another agreed channel.
• Required content: a description of the breach, supporting documents and the remedy sought.
• Deadlines: time allowed to respond and, where appropriate, put the problem right.
• Escalation: who steps in if your usual contact does not respond.

Do not confuse internal response deadlines with statutory time limits for bringing legal proceedings. An ongoing conversation with head office does not guarantee that those time limits are paused or interrupted.

Practical test: imagine a duplicate charge that nobody corrects. If the agreement does not make clear whom to contact, how to prove receipt and what happens next, ask for clarification before signing.

2. Understand your legal protection in Spain

Spain does have specific legislation governing certain aspects of franchising: Article 62 of Law 7/1996 on the Regulation of Retail Trade, and Royal Decree 201/2010. However, these do not provide a comprehensive framework for every contractual dispute; general rules on obligations and contracts also apply.

Pre-contractual information must be provided in writing at least twenty working days before you sign the agreement or a preliminary agreement, or make any payment to the franchisor. Use that period to examine the dispute resolution clauses alongside the other essential terms.

The national requirement to submit details to the Register of Franchisors was also abolished in 2018. A purported registration number is no substitute for a legal review of the agreement.

When buying a franchise to run a business, you will normally be acting as a business operator, not as a consumer. You should therefore not assume that consumer contract protections apply automatically. That does not mean every clause is valid: its enforceability depends on the applicable rules and how it was incorporated and agreed.

3. Compare negotiation, mediation, arbitration and court proceedings

These routes have different effects. The agreement should make clear which applies and in what order.

Direct negotiation. This may be the first step, with named contacts and a timetable. Avoid internal procedures that could drag on indefinitely or block urgent measures.

Mediation. A neutral third party helps the parties reach an agreement but does not impose a decision. Check how the mediator is appointed, who pays and how any settlement would be formalised to make it enforceable where appropriate.

Arbitration. The arbitrator decides the dispute by issuing a binding award. Under Law 60/2003 on Arbitration, there are limited grounds for an action to set aside an award: it is not an appeal allowing the entire substance of the dispute to be argued again. Check the arbitral institution, seat of arbitration, language, number of arbitrators and rules on costs.

Court proceedings. Identify which courts the agreement specifies and have the validity of that provision reviewed. Express agreements on court jurisdiction are subject to limits, including in contracts offered on a take-it-or-leave-it basis or containing standard terms imposed by one party.

Organic Law 1/2025 requires prior attempts at negotiation before bringing civil court proceedings, subject to exceptions. Do not assume an informal complaint meets this requirement: a lawyer should verify the appropriate method and how to prove that an attempt was made without breaching its confidentiality.

4. Calculate the real cost of defending your rights

A clause may seem balanced yet prove difficult to use in practice. Obtain an independent cost estimate for both a straightforward dispute and a more complex one, without assuming you will recover all your expenses even if the outcome is in your favour.

Include professional fees, any expert reports, travel and, where arbitration applies, institutional charges and arbitrators’ fees. Also consider the management time it would take away from your business.

Negotiate a proportionate procedure, reasonable opportunities to remedy breaches and safeguards ensuring that no internal stage prevents you from seeking urgent legal protection where available. Do not unilaterally withhold payments in response to a disagreement without taking advice: you could create a further breach.

Keep the signed agreement, its different versions, schedules, invoices and correspondence. Record the facts with dates and separate evidence from your interpretation of events; avoid recording or sharing information without checking that it is lawful.

Practical conclusion: before you buy, ask your lawyer to walk through a hypothetical claim using the contractual procedure. You should be able to explain the first step, who would decide the dispute and the likely cost. If you cannot, an important term still needs clarification.