Franchise or trade mark licence: how to decide in Spain

Having a recognised business and receiving requests to use its name does not mean you should turn it into a franchise. Before planning your expansion, decide what you intend to provide: specific rights of use, or a complete way of running the business. This distinction shapes your obligations and the expectations of those joining your franchise network.

1. Distinguish a shared brand from a shared business model

A trade mark licence authorises another business to use a distinctive sign under agreed conditions. It may specify products, services, territory, duration and quality controls. However, permission to use a trade mark does not, on its own, constitute a franchise.

In Spain, Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010 set out the specific framework for franchising. There is no single piece of legislation officially called the ‘Franchise Act’ that governs the entire relationship.

Article 2 of the royal decree describes a relationship in which the franchisor grants the right to operate a business that it has previously run with sufficient experience and success, in return for direct or indirect financial consideration, or both. This includes, at a minimum:

• The use of a common name or trading sign, or other intellectual or industrial property rights, and a uniform appearance for premises or vehicles.
• The transfer of the franchisor’s own substantial and distinctive know-how.
• Ongoing commercial or technical assistance, or both, throughout the term of the agreement.

Simply supplying a logo, recommending furniture and charging a recurring fee is therefore not enough. You need to examine what the other business actually receives.

2. Take stock of what you can provide

Before choosing a contract, prepare a table with three columns: asset or service, available evidence and commitment you can fulfil. The aim is not yet to draft final documents, but to check that your offer has real substance.

In the first row, identify the rights you will allow others to use. You must be able to show that you own those rights or have sufficient authority to permit their use. Holding a licence from a third party does not necessarily entitle you to grant further rights to other operators.

Next, describe the practical knowledge that makes your way of working distinctive. ‘Good customer service’ and ‘quality products’ are aspirations, not an adequate explanation of a system. It is more useful to identify how you organise service delivery, resolve recurring problems or make decisions that maintain a consistent customer experience.

Finally, list the assistance you can sustain throughout the relationship. Separate what you provide at the outset from what will remain available afterwards. If you can only authorise use of the name and offer initial recommendations, you have not yet demonstrated that you can support a franchise.

This exercise also helps identify dependencies on third parties, such as software, creative materials or methods whose use you cannot freely authorise.

3. Choose according to substance, not the contract’s title

Calling an agreement a ‘licence’, ‘collaboration’ or ‘authorised distribution’ arrangement does not guarantee that it falls outside the franchising framework. Its legal classification depends on its substance and how the relationship works, not just the heading on the document.

Imagine a business that permits use of its name, transfers its own operating system, requires a uniform appearance and provides ongoing assistance in return for payments. Even if it calls the agreement a ‘commercial licence’, it will need to assess whether the elements of a franchise are present.

By contrast, permission to apply a trade mark to certain products, without transferring a business system or providing that ongoing assistance, may constitute a licence. Among other applicable rules, it will still be subject to Law 17/2001 on Trade Marks and general contract law.

Do not choose a licence to avoid obligations arising from the actual relationship. Equally, do not promise a full franchise when you can only provide rights of use. Both choices create expectations that may later lead to disputes.

4. Review the implications before marketing your expansion opportunity

If the model has the elements of a franchise, you must build its legal obligations into your sales timetable. Article 3 of Royal Decree 201/2010 requires you to provide written, truthful and non-misleading information at least twenty working days before signing the contract or preliminary agreement, or receiving any payment from the prospective franchisee.

This obligation does not disappear if you call the first payment a ‘licence reservation fee’. Before accepting money, review your commercial offer, documents and proposed operating arrangements together.

Both models may also be subject to competition law. Choosing a licence does not automatically make every commercial restriction you wish to impose lawful.

Practical conclusion: set out in writing which rights you will grant, what know-how you will transfer and what assistance you will maintain. Then commission a legal review of those arrangements. The right model should reflect what you can deliver, rather than suggest a capacity for expansion that you do not yet have.