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In page Operation Felix:

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On 24 August, Hitler approved a general plan for seizing Gibraltar. On 23 October, he met Franco at Hendaye, France, and proposed that Spain enter the war on the Axis side as early as January 1941; Gibraltar would be taken by special Wehrmacht units and turned over to Spain. Franco however refused the offer, emphasising Spain's need for large-scale military and economic assistance. Hitler took offence when Franco expressed doubts about the possibility of a German victory in fighting the UK on its home territory. Franco also pointed out that even if the British Isles were invaded and conquered, the British government, as well as most of the British Army and vastly powerful Royal Navy, would probably retreat to Canada and continue the Battle of the Atlantic, with U.S. support.