Territorial exclusivity when franchising a business in Spain

When turning your business into a franchise network, promising an ‘exclusive territory’ may seem straightforward. However, that phrase can lead to disputes unless it makes clear what is protected, for how long and against which activities. Before offering territories, you need to translate your expansion strategy into commitments you can honour and which comply with competition law.

1. Define the exclusivity you can grant

Territorial exclusivity does not arise automatically when a franchise agreement is signed: it must be agreed. Nor does it necessarily mean that every sale to a customer in that territory belongs to the franchisee.

Start by distinguishing between three different commitments:

• Not opening company-owned outlets within the allocated territory.
• Not authorising other franchised outlets in that territory.
• Restricting certain sales activities targeted at the territory, but only where competition law permits.

Do not present these commitments as equivalent. You can protect a territory against new openings while maintaining a central online shop that accepts orders from customers there. This arrangement must be explained before the agreement is signed, not when the first dispute arises.

Take stock of your existing and planned channels: physical outlets, e-commerce, delivery platforms, key accounts and temporary outlets. Decide which fall within the territorial commitment and which require separate treatment. Avoid broadly reserving rights over ‘any future channel’: an overly wide exception can render the protection offered meaningless.

2. Define the territory in a clearly verifiable schedule

A description such as ‘central Madrid’ is not enough to manage outlet openings. Use a map and a written description that identify the boundaries unambiguously. You can use streets, administrative boundaries or postcodes, specifying which document takes precedence if there is a discrepancy.

The size of the territory should reflect the actual capacity to serve it, not just its commercial appeal. Consider travel distances, physical barriers, concentrations of potential customers and the location of existing outlets. Do not confuse the resident population with available demand.

The schedule should address at least the following questions:

• Where the outlet may be located and whether relocation requires approval.
• How shopping centres, stations and other special locations are treated.
• How accounts already served directly by the franchisor are handled.
• What procedure will apply if the administrative boundaries used to define the territory change.

Test the result against concrete scenarios: premises on a boundary street, a business with offices in several territories, or a customer requesting a service outside the usual area. If the answers depend on an informal conversation, the agreement needs greater precision.

3. Separate territorial protection from sales restrictions

In Spain, franchising is specifically regulated by Article 62 of Law 7/1996 on Retail Trade and the provisions of Royal Decree 201/2010 that remain in force. General contract and competition law also apply.

When drafting territorial restrictions, particular attention should be paid to Law 15/2007 on the Defence of Competition and, where applicable, the European framework: Article 101 of the Treaty on the Functioning of the European Union and Regulation (EU) 2022/720 on vertical agreements.

The key practical distinction is between active sales, involving activities specifically targeted at particular customers or territories, and passive sales, which respond to unsolicited requests. The scope for restricting each type differs and depends on the distribution system and the applicable legal conditions.

For this reason, do not include a ban on ‘selling outside the territory’ without specialist review. Nor should you impose a general ban on the effective use of the internet. A website accessible from another Spanish province does not, in itself, amount to a campaign specifically targeting that province.

Also clarify who invoices orders placed through the central website, who fulfils them, how enquiries are allocated and who handles returns. These operational decisions must be consistent with the agreement and with obligations towards consumers.

4. Agree the duration, review process and dispute resolution procedure

State whether exclusivity lasts for the same term as the agreement and what happens on renewal. If it depends on targets, these must be measurable, clearly communicated and supported by a reasonable review procedure. Avoid giving the franchisor the right to reduce the territory unilaterally on the basis of a vague assessment of performance.

Set out how issues are reported, what documentation will be reviewed and how long the franchisee has to remedy breaches where appropriate. Ensure that sales promises also align with the pre-contractual information: this must be provided in writing at least 20 working days before an agreement or preliminary agreement is signed, or any payment is received from the prospective franchisee.

Do not confuse these obligations with registration requirements: Royal Decree-Law 20/2018 abolished the national obligation to notify the Register of Franchisors. There is no general register of franchise agreements that confers validity on these clauses.

Practical conclusion: before offering a territory, prepare a map, a channel matrix and a review procedure. Have them legally reviewed and use exactly the same territorial scope in your sales presentation and in the agreement.