Franchising in Spain: agree terms for future refurbishments

The investment needed to join a franchise network does not always end when you open. During the contract term, you may be required to replace furniture, refurbish the frontage or update the premises to reflect a new brand identity. Before buying, find out who decides on these changes, who pays for them and what limits apply. A vaguely worded obligation can lead to costs you may struggle to afford.

1. Identify which changes you could be required to make

Repairing a worn counter is not the same as replacing it because the brand has changed its design. Nor is complying with a new legal requirement the same as adopting a trading format chosen by the franchisor. Distinguishing between these situations helps you negotiate clear responsibilities.

Ask for the contract to distinguish between:

• Routine maintenance: upkeep, cleaning and repairs due to wear and tear.
• Equipment replacement: replacement following breakdown, obsolescence or the end of its useful life.
• Brand refreshes: changes to signage, décor, uniforms or furniture.
• Changes to the business format: works that alter the layout or the way services are delivered.
• Regulatory compliance work: changes needed to meet the rules applicable to the premises.

Look for wording such as ‘current brand identity’, ‘mandatory adaptation’ or ‘updates to the manual’. Ask what investment these clauses allow the franchisor to require and what procedure applies. An obligation to maintain the brand identity should not leave the financial scope of future refurbishments undefined.

Also ask for details of recent refurbishments at comparable outlets. These do not guarantee what will happen, but they can help you understand how such decisions are made.

2. Review the contract alongside the operations manual

Spain has specific regulations governing franchising, although no single law sets out every aspect of a franchise agreement in exhaustive detail. Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010 establish the framework for franchise activity and pre-contractual disclosure.

Article 3 of the royal decree requires written information to be provided at least twenty working days before a contract or preliminary agreement is signed, or any payment is made to the franchisor. This information must include the investment required and the essential terms of the agreement. If a refurbishment is already planned that will affect your outlet, ask for written details before committing.

The Spanish Civil Code’s general rules on contracts and good faith also matter when it comes to refurbishment obligations. Article 1256 prevents the validity and performance of a contract from being left to the discretion of one party alone. This does not automatically make every update to the manual invalid: its scope and the agreed terms need to be examined.

Check which documents form part of the contract, which takes precedence if there are inconsistencies and how they can be amended. If the full manual is confidential, ask at least for the provisions that create investment obligations and a clear procedure for communicating changes.

3. Negotiate financial limits and a clear procedure

A promise that refurbishments will be ‘reasonable’ offers little certainty. It is more useful to agree on verifiable criteria and record them in a signed schedule to the contract.

Raise the following points:

• Notice period: enough time to obtain cost estimates, arrange finance and organise the work.
• Frequency: a minimum interval between brand refreshes, with clearly defined exceptions.
• Financial cap: a maximum amount or objective formula, specifying which costs it covers.
• Budget: an itemised breakdown of building work, transport, installation, removal of existing items and professional fees.
• Delivery: the option to compare quotes from contractors who meet the specifications.
• Cost overruns: prior approval and an agreed allocation of additional costs.

Include provisions for equipment that still works and improvements you have already made with approval. Ask whether these can be retained, adapted or taken into account to reduce the cost of the new work.

Distinguish commercial decisions from legally required work. Allocating costs in the contract does not remove any responsibilities that the authorities may enforce against either party.

4. Protect the time you need to recover your investment

A refurbishment required shortly before the contract expires poses a particular risk: paying for an improvement you will have little time to use. Compare the proposed timetable with the remaining contract term, without assuming that renewal is guaranteed.

You could propose an exemption during the final part of the term, phased implementation or a financial contribution from the franchisor. If a contract extension is offered to justify the investment, its terms should be signed rather than left subject to later approval.

Also clarify who is responsible for temporary closure, permits and operating costs while the work is under way. Do not assume that regular payments will be suspended: this must be expressly agreed.

Practical conclusion: before buying, set out in a contract schedule which refurbishments can be required, how much they can cost, how much notice must be given and what happens if little time remains on the contract. If the answers depend entirely on future decisions by the franchisor, seek a legal review before signing.