How to Set Your Franchise Fees in Spain

When franchising an existing business, copying another brand’s fees can leave services underfunded or result in charges that are difficult to justify. Your decision should start with what you will provide when each franchisee joins and the obligations you will take on afterwards. Within a franchise network, clear financial terms help build lasting relationships. This guide focuses on designing those payments before offering your first contract.

1. Separate the initial franchise fee from recurring payments

The initial franchise fee is an upfront payment, and you need to define what it covers. It is not the same as the total investment required to open: fit-out works, equipment, stock, deposits and working capital for the first few months may involve separate outlays.

Before setting the fee, prepare a breakdown of what it will include. This might cover access to the business system, operating documentation, initial training and specific support activities. For each item, identify who is responsible, the time involved and the expected external costs.

Distinguish between three categories:

• Included items: what the prospective franchisee will receive without a separate charge.
• Excluded expenses: travel, accommodation or other costs they will pay separately, where agreed.
• Optional services: additional support with its own price or quotation.

Avoid presenting the fee simply as a way to recover the money the founder has invested over the years. That investment may influence the commercial value of the system, but it does not replace a clear explanation of the rights and services being offered.

You must also decide when the fee becomes due and when it must be paid. These are not necessarily the same point in time. If you plan to offer instalments, link them to verifiable dates or milestones and have the implications reviewed by a legal adviser.

2. Choose a formula for the ongoing franchise fee

The ongoing franchise fee may be a fixed amount, a percentage of a defined calculation base, or a combination of the two. No single formula suits every business: your choice should reflect the nature of the business and the franchisor’s ongoing obligations.

A fixed fee makes costs easier to forecast, but places a greater burden on an outlet with low sales. A percentage of sales adjusts the payment to trading activity, although it requires a precise definition of the calculation base. A hybrid formula, with a minimum fee and a variable component, needs particular care so that prospective franchisees understand its actual effect.

If you choose a percentage, avoid using phrases such as ‘on turnover’ without further explanation. Resolve at least the following points:

• Whether the calculation base excludes VAT.
• How returns, cancellations and discounts are deducted.
• How sales made through platforms and the associated commissions are treated.
• Which outlet is credited with online transactions.
• In which period advance payments, vouchers or gift cards are counted.

Applying a percentage to profits requires even greater precision: the result will vary depending on which expenses are allowed and the accounting policies used. Do not choose it simply because it seems more commercially appealing.

Test the formula against several hypothetical scenarios, clearly labelled as such. The aim is not to promise sales, but to check that both parties can reproduce the calculation and understand how the payment changes.

3. Explain all charges and the rules governing them

Prospective franchisees must be able to distinguish the ongoing franchise fee from other compulsory payments. If there is a technology fee, an advertising contribution or a charge for additional services, list these separately. Avoid advertising a low fee if unavoidable add-ons are then needed to operate the business.

The contract should specify payment frequency, due dates, statements supporting the amounts charged and the procedure for correcting errors. It is also worth explaining what happens during partial months, temporary closures or initial periods with special terms.

If you intend to adjust fees, set out a clear mechanism: the reference measure used, the date the adjustment takes effect and how it will be communicated. An open-ended phrase such as ‘in accordance with head office’s current rates’ gives prospective franchisees no clear measure of their future commitment.

Run a simple test: give someone who was not involved in designing the fees a sample payment statement and the proposed clauses. If they cannot work out how the amount was calculated, revise the wording before using it commercially.

4. Include fees in the legally required information

In Spain, the specific legal framework includes Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010. These rules do not set an official tariff for franchise fees.

Article 3 of the Royal Decree requires written information that is truthful and not misleading to be provided at least twenty working days before the contract or preliminary agreement is signed, or before the prospective franchisee makes any payment to the franchisor. The essential details that must be disclosed include the financial consideration payable.

It is therefore not enough to advertise the headline percentage: present the planned payments and their terms in a way that makes the financial commitment understandable. Arrange a legal and tax review of the clauses, invoicing arrangements and applicable taxes before you start collecting payments.

Practical takeaway: prepare a single fee schedule showing each charge, what it covers, its calculation formula, payment deadline and adjustment mechanism. If you can explain every charge and calculate it without ambiguity, you will have a stronger foundation for bringing franchisees on board.