Reserving a Franchise in Spain: Protect Your Advance Payment

Paying a reservation fee does not necessarily mean buying a franchise, but it can create obligations before you have decided to invest. To join a franchise network with confidence, you need to know what that advance payment commits you to and how to recover it if the deal does not go ahead. What matters is not whether the document is called a ‘reservation agreement’, but what it actually says.

1. Identify what you are paying for and what you receive

A franchisor may ask for a payment to assess your application, temporarily reserve a territory or begin preparations for opening. These are different purposes and should not be bundled together under a vague description.

Before transferring any money, ask for a document identifying the recipient, the amount, the purpose of the payment and exactly what you receive in return. If an intermediary is involved, check who is responsible for refunding the money and what authority the intermediary has to collect it.

The agreement should clarify:

• Purpose: what right or service you obtain through the payment.
• Duration: when the reservation begins and ends.
• The franchisor’s commitments: what it will do, and what it will refrain from doing, during that period.
• Treatment of the advance payment: whether it will be deducted from the initial franchise fee and how that deduction will be documented.
• What happens on expiry: whether the reservation lapses, is extended or requires fresh agreement.

Do not assume that a reservation gives you exclusivity, final approval of your application or approval of your proposed premises. Nor should you assume that the payment will count towards your final investment. All of this must be stated expressly.

2. Observe the statutory waiting period before paying in advance

Spain has specific franchise legislation: Article 62 of Law 7/1996 on the Regulation of Retail Trade and Royal Decree 201/2010, insofar as it remains in force.

The franchisor must provide the mandatory pre-contractual information in writing at least 20 working days before any franchise contract or preliminary agreement is signed, or before the prospective franchisee makes any payment to the franchisor. A reservation payment therefore cannot be used to bypass this review period.

Keep the documents you receive and evidence of the date they were delivered. If you are asked to pay to access the mandatory information, ask for the process to be reordered: you must receive it first and be given the required time to review it.

In addition to these specific rules, the agreement is subject to the general rules on obligations and contracts in Spain’s Civil Code and, where applicable, the Law on General Contract Terms. The document’s title does not, on its own, determine its legal effect.

Do not confuse the information review period with an automatic right to cancel. Anyone entering into a contract to run a business should not assume they have the cancellation rights associated with a consumer purchase. Equally, a failure to meet disclosure obligations does not, by itself, guarantee an immediate refund: the consequences depend on the circumstances and the agreement.

3. Agree refund terms for specific situations

The phrase ‘non-refundable reservation fee’ deserves particularly careful scrutiny. Before accepting it, distinguish between withdrawing voluntarily and the project falling through because an outstanding condition is not met or the franchisor makes a particular decision.

Negotiate written terms covering these situations:

• The franchisor ultimately rejects your application.
• No premises meeting the agreed requirements can be found.
• The necessary finance is not secured within the agreed timeframe.
• Obtaining the permissions needed to open proves unfeasible.
• The final contract contains material terms that differ from those previously presented.
• The franchisor decides not to proceed with the deal.

These circumstances do not always create an automatic right to a refund. It is therefore sensible to include them as express conditions, specifying what evidence is required for each and when notice must be given.

If expenses may be deducted, insist that they are defined, supported by evidence and subject to an agreed cap. Avoid open-ended wording such as ‘all administration costs’ without details of the services or how the costs are calculated.

Also set a specific deadline for repayment, the payment method and the person or organisation responsible. A promise of a refund with no deadline can turn into a difficult claim to pursue.

4. Do not let a reservation commit you to buying

Check whether, alongside the advance payment, the document includes an obligation to sign the final contract, penalties, personal guarantees or authorisation to take further payments. A short reservation agreement can contain significant financial commitments.

Ask for a draft of the final contract before accepting any obligation to sign it. Do not commit to terms that the franchisor can set later without your consent.

Make sure the deadlines align, too: the reservation should not expire while you are still waiting for approval that the franchisor is responsible for giving. Any extension must be documented, along with its effect on the advance payment.

Practical takeaway: before paying, check three things: what you receive, what obliges you to proceed and when you can recover your money. If any answer depends on a verbal promise, an essential term still needs to be put in writing.