Doing business in Spain without investing

1. Signing a Distribution Agreement

You may promote your goods without investing in Spain by using external  distribution. The Distribution Agreement must relate to the supply of goods to distributors for they to resell them in its own name.

Under a distribution agreement the supplier is liable in relation to the goods supplied. The distributor company must assume the risks derived from the distribution of the goods as it acts in its own name and right.

In general terms, Distribution Agreements are subject to the terms that the parties freely agree. European Union’s regulations on exclusive distribution are applicable in Spain. A very specific regime is provided to regulate these contracts.

The provisions that may be included in a distribution agreements are as follows:

  • Supplier and distributor’s details.
  • A pricing system and modifications.
  • Payment terms (agree on currency).
  • Minimum volume of sales and its subsequent modifications.
  • Supplier’s liability for defective product.
  • Duration of the agreement.
  • Law and jurisdiction applicable in case of dispute.
  • The geographical area to be covered by the distribution.

There are some issues that you must remember when signing a distribution contract with a Spanish distributor; you must protect your Intellectual Property, your home country protection is not protection in Spain, your Spanish distributor may need licenses to use your intellectual property rights in Spain.

You need full advice about other important issues such as the usage of your trademark in Spain. Local legal assistance is strongly advisable. An expert Spanish lawyer can draft a distribution agreement for you to work in Spain, he may also advise you about the work relationship with your Spanish distributor.

2. Operating through an agent

2.1. Overview

You may penetrate the Spanish market without investing through hiring an internal agent in Spain. He will promote your products or services in your name, without assuming any risk, you will be bound by the acts of your agent. The agent cannot bind his principal by acts which are beyond the scope of his authority.

If you hire a non-Spanish sales agent to promote your products in Spain, be advised that he will be required to hold a visa and work permit. He may need licenses in order to use the principal’s intellectual property rights in Spain.

It will be necessary the principal employer’s consent for the sales agent to represent another different company, which activity is in competition
of the principal. The agent shall maintain independent accounting for each principal represented.

The sales agent may appoint sub-agents prior consent of the principal.

Law and jurisdiction applicable is that of the principal employer’ s country.

2.2. The Agency Contract

Agency contracts may have a definite or indefinite duration. Contracts for a definite period terminate as they expire and no renewal is made. Contracts for an indefinite period may be terminated at any time unilaterally, prior written notice of the parties.

Remuneration of the sales agent may be fixed, variable or a combination of the two. He may be compensated with a special indemnity when contributing new clients to the business of its principal or increasing significantly the volume of sales with existing clients. The principal must pay the commissions by the end of each quarter of the year. The agent’s expenses must be fully reimbursed to him, remuneration does not include reimbursement for expenses, unless otherwise agreed.

Under certain circumstances, the agency agreement may include a non-competition provision to restrict the professional activities that the agent may undertake after the termination of this contract. This restriction cannot last longer than 2 years after completion of the contract.

An expert Spanish Lawyer can provide you with full advice about work relationship with your sales agent in Spain; he may also draft an agency agreement for you (see our services below).

3. Franchising

Franchises have increased in Spain and grown rapidly. This method for doing business in Spain without investing has become very popular, it has effectively
been used for small retailers to compete with larger retail stores.

Through a franchising contract, franchisee is given the right to use goods, services, trademark and advertising of the franchisor for a specific
period of time. The franchisee must pay the franchisor as a condition of obtaining or commencing the franchise operation.

Franchising companies must be entered in a special Administrative Franchise Registry within a minimum of 20 days prior the signature of a franchising contract or making any payment to franchiser. The franchiser may be seriously fined for non-registration.

The franchisee is the franchise business owner, though this takes part of a commercial network. He must submit to the network business organization.

Franchisor must deliver written information to the franchisee before the signature of the franchising contract, in order that the franchisee may
decide on whether to join the franchise team or not.

The franchising contract must state those terms that the parties consider appropriate, as long as those are not contrary to law or public policy. The
following provisions are commonly stated:

  • Initial franchise fee: This is what it costs to join the franchise network
  • Royalty fees: These payments will continue as long as the franchise lasts. Normally these fees range from 4 percent to 20 percent, depending on the revenues.
  • Advertising fees: Once you join the team you will be expected to pay annual fees for the franchise advertising, this charge will not exceed 3 percent of gross sales.

4. Getting legal help

We provide solid legal advice on Spanish law for corporate and individual customers who are intending to invest in Spain.

Ask an English-speaking Spanish lawyer now.

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