THE ABOLITION OF THE SPANISH FRANCHISORS’ REGISTRY

Mercedes ClavellOf Counsel, Arco Abogados

Law 7/1996, regarding ordinance of retail trade, regulated for the first time the franchise activity in Spain through a single article, 62, whose point 2 provided that the physical or legal persons who intend to develop in Spain the franchising activity should be registered, if so, in the Registry that will be established by the correspondent public administrations. The registration was mandatory and prior to the development of the franchising activity. The first regulation on the Franchisors’ Registry took place in 1998, through Royal Decree 2485/1998, of November 13th.

To adapt Spanish laws to Directive 2006/123/CE regarding services in the internal market (Bolkestein Directive), on March 2nd, 2010, the Spanish Parliament approved Law 1/2010, amending Law 7/1996 regarding ordinance of retail trade. This Law substituted the previous registration for registration within 3 months after the start of the franchising activity. The Law did not mention when the term for the start of the franchising activity should be considered to take place: in our opinion, it should be from the start of the activities for the commercialization of the franchise, but in practice, it has been usual to apply the date of the first franchise agreement.

Few days after, on March 13th, 2010, Royal Decree 201/2010 was published, containing the regulations regarding the exercise of commercial activity under the regime of franchising and the communication of data to the franchisors’ registry, confirming the 3 months term from the start of the franchising activity for registration. Royal Decree 201/2010 dedicated a total of 8 articles, from 5 to 12 both included, to the regulation of the Franchisors’ Registry and only 3 articles (2, 3 and 4) to the regulation of the franchising activity itself.

The initial wording of both Law 1/2010 and Royal Decree 201/2010 foresaw the coordination between the franchisors’ registries established in each Spanish Autonomous Community and the central registry, in which foreign franchisors should be registered. In practice, most of the Autonomous Communities did not establish their own franchisors’ registry, or if they did establish it, it was closed in a short term, therefore the central registry became the only one in Spain.

The functions that Royal Decree 201/2010, through its article 6, entrusted to the franchisors’ registry were the following ones:

  1. To register the franchisors.
  2. To grant a registration number.
  3. To update the information on registered franchisors and their franchised outlets.
  4. To cancel the registration of franchisors, upon the company’s request, after a court decision or because of lack of updated data.
  5. To issue certificates regarding registered franchisors.
  6. To give access on the registered data to the regional administrations.
  7. To provide citizens with public information.
  8. To register the foreign franchisors. It is necessary to point out that franchisors registered in any other EU country should only communicate certain data to the Spanish registry.
  9. Any other function compatible with its activity that could be entrusted by the authorities.

The main advantage of the registry was to provide from a public and official source some data regarding franchisors which could not be accessed to in any other way (and cannot nowadays), as for example, the number of own and franchised units, and the number of franchisees who had left the network, considering however that the data published by the registry were those provided by the franchising company. The registry did not check any of the information provided to it by franchisors, except those regarding the trademarks.

The procedure to communicate data to the franchisors registry consisted, according to article 7 of Royal Decree 201/2010, in sending to the registry the following information:

  • Company’s name, registration at Companies’ Registry and tax number.
  • IP rights which are assigned through the franchise agreement, and proof of having them in force as owner or licensee, duration and legal claims against them, if any.
  • Description of the business which is the franchise object, number of franchisees and franchised and owned outlets, mentioning the town and province, the seniority of the franchise activity and number of franchisees who have left the franchise network during the last two years.
  • In case of master franchisees, apart from the above information, it should be provided with the name, address and type of legal entity of the master franchisor, duration of the master franchise agreement and declaration of having the assignment by the master franchisor.

Once registered, franchisors should communicate to the registry any change in the registered data within a three months term, and during January each year, the opening or closing of franchised or own outlets produced during last year should be communicated.

The information of the franchisors registry could be publicly seen at the registry website.

Article 9 of Royal Decree 201/2010 foresaw the informatization of the registry, and article 10, the coordination among the regional registries. Article 11 established the documents that could voluntarily be registered, as having a quality certificate, adhering to an ADR system for disputes between franchisor and franchisees, or a consumers’ arbitration system, the signature of ethics codes regarding franchising, etc. Article 12 provided that within the franchisors registry there would be at least a section for consolidated franchisors, which were those who had developed the franchising activity at least during two years in two franchised units and they have two own units.

All these rules and obligations have been abolished by Royal Decree-law 20/2018, which is in force since December 8th, 2018, which derogates all the articles regarding the franchisors registry, that is, articles 5 to 12 of Royal Decree 201/2010.

The reasons for the abolishment are based on the fact that in 2016 the online franchisors registry was started, which in principle should provide some advantages for the franchising companies. However, in practice it implied some hindrances as it requested them having some electronic certificates and technical requirements which implied a high bureaucratic burden for the companies, making very difficult for them to communicate with the registry and fulfil their obligations as franchisors. It should be mentioned that all Spanish companies must operate with a tax certificate, whose obtaining is also a little bit bureaucratic, but this tax certificate was not valid for communicating with the franchisors registry. In spring 2018 the obligation of registering and updating information was temporarily suspended -exclusively because of this technical problems-, and this temporary suspension has become a final abolishment.

Nowadays only articles 1 to 4 of Royal Decree 201/2010 continue in force, being the most relevant article 3, regarding the disclosure information to be provided to prospective franchisees, at least 20 working days before the signature of any agreement, or pre-agreement or the payment of any amount by the future franchisee to the franchisor.