Franchising in Spain: how to agree on multiple openings

When a prospective franchisee proposes opening several outlets, a business owner may see an opportunity to grow while dealing with fewer people. However, granting rights to multiple openings also concentrates risk: funding, management and brand presence will depend on a single organisation. To build a stable franchise network, it is sensible to separate the first opening from the right to develop subsequent outlets and define what must be demonstrated at each stage.

1. Distinguish multi-unit franchising from master franchising

The first step is to clarify what is being offered. A franchisee operating several outlets on its own account is not the same as a master franchisee authorised to grant franchises to third parties. The right to sub-franchise should not be assumed: it requires specific authorisation and a dedicated contractual structure.

Before negotiating amounts or dates, prepare a summary answering these questions:

• How many outlets does the proposal cover?
• Who will own and operate each one?
• Is the prospective franchisee committing to open them, or being given an option?
• Will each outlet require its own agreement?
• Will other companies or business partners be allowed to participate in the operation?

These decisions determine who is responsible for the obligations and what each party can require of the other. If separate companies are to be used, specify how they will be approved and what guarantees may be needed, keeping these distinct from the liability of the company signing the initial agreement.

Avoid selling a vague promise of growth. A commitment to three openings, for example, must be distinguished from an initial franchise with the possibility of negotiating two more.

2. Turn the timetable into verifiable milestones

Simply setting opening dates is not enough. The timetable should include conditions that allow you to check whether the business and the operator are ready to move forward. These are agreed management criteria, not universal legal requirements.

Before authorising a second outlet, you might check that the first has a trained manager in place, that financial obligations are up to date and that funding for the new investment has been demonstrated. It is also sensible to check that opening another outlet will not leave the first without its essential team.

For each stage, define:

• The evidence required: financial documentation, a proposed site or a staffing structure.
• Who decides: the person or team at head office responsible for reviewing the application.
• The response deadline: to avoid leaving the prospective franchisee waiting indefinitely.
• The possible outcomes: approval, a requirement to address shortcomings, or a deferral with reasons given.

Distinguish delays attributable to the operator from those associated with licences, building work or the availability of premises. The agreement should explain how to request an extension and what happens while that request is being considered. Do not present a target commercial opening date as a guarantee that an outlet can legally open on that day.

3. Document the commitment before taking payment

Spain has specific franchise legislation: Article 62 of Law 7/1996 on the Regulation of Retail Trade, and Royal Decree 201/2010. Article 3 of the Royal Decree requires written, truthful and non-misleading pre-contractual information to be provided at least twenty working days before a franchise agreement or preliminary franchise agreement is signed, or before the prospective franchisee makes any payment to the franchisor.

Calling a document a ‘development agreement’ does not allow you to bypass this obligation if its content constitutes a contractual or pre-contractual franchise commitment. Before signing it or taking payment, commission a review of its legal nature and the information that must be provided.

In a multi-unit arrangement, the prospective franchisee must be able to understand what they are committing to from the outset and what will remain subject to later agreements. Explain any development-related payments, whether they will be credited towards individual openings, and how those sums will be treated if the full programme is not completed.

An investment estimate for a typical outlet is no substitute for a financial assessment of the overall operation. Identify which costs will recur at each outlet and what shared resources the operator will need. A negotiated reduction in the franchise fee does not remove the cost of supporting several openings at once.

4. Limit the impact of an unsuccessful expansion

Agree on what happens if a future opening does not go ahead. Losing the right to develop new outlets should not be treated as equivalent to terminating the agreements for outlets that are operating properly, unless this is expressly and proportionately provided for.

You should also address the reverse situation: a serious issue at one outlet may justify reviewing the operator’s ability to continue expanding. Define the relevant events and their consequences, avoiding wording that allows new openings to be blocked over any minor disagreement.

At head office, also assess how dependent your franchise network will become on that operator. Several outlets under the same management may share cash-flow or staffing problems. Monitor them collectively as well as reviewing each outlet individually.

Practical conclusion: before committing to several openings, prepare a matrix showing each outlet, its operator, the planned opening date, the conditions for authorisation and the consequences of delay. If any entry is ambiguous, resolve it before signing or receiving money.