Franchise licences: what to check before you buy

An established brand may have a proven business model, but that does not mean your outlet is authorised to operate at any address. Before buying a franchise in Brazil, check whether the intended activity can be licensed at your chosen premises. Distinguishing the franchisor’s commercial approval from the permissions required by public authorities helps you avoid committing to an operation that still faces legal obstacles.

1. Define exactly what the outlet will do

Licensing starts with the actual business activity, not simply the brand name. Two outlets in the same network may face different requirements if one only sells products while the other also prepares food, carries out procedures or uses specialist storage facilities.

Ask the franchisor for a description of the activities planned for your chosen format. Include additional services, deliveries, stock, equipment and customer-facing operations. Take this description to an accountant to check the appropriate economic activity classifications and the procedures for setting up the company.

Law No. 13,966/2019, Brazil’s Franchise Law, requires the Franchise Disclosure Document (Circular de Oferta de Franquia, or COF) to provide a detailed description of the franchise and a general description of the business and the franchisee’s activities. This information is a starting point for your checks, not an operating licence.

Compare three things: what the sales presentation promises, what the COF describes and what will actually happen at the outlet. If there are discrepancies, clarify them before proceeding. An activity presented as ancillary may change the requirements that apply to the premises.

2. Check the suitability of the address with the relevant authorities

The franchisor’s approval of a site indicates that it meets the brand’s criteria. It does not replace the public authorities’ assessment of permitted use, safety or sanitary conditions.

Submit a preliminary feasibility enquiry for the proposed activities and address through the official channels available in the municipality or through the integrated business registration system. Depending on the operation and local rules, you may also need to check requirements with the health surveillance authority (Vigilância Sanitária), the fire service (Corpo de Bombeiros), environmental authorities or professional regulatory bodies.

Use this checklist to guide your enquiry:

• Permitted use: can the activities be carried out at that address?
• Condition of the premises: are there outstanding issues that could make approval difficult?
• Operational features: do floor area, customer capacity, equipment or storage arrangements affect the requirements?
• Technical responsibility: does the activity require a suitably qualified professional or a specific registration?
• Local restrictions: are there limits on opening hours, noise or external advertising?

Do not assume that you can use a previous occupier’s authorisation. Changes in ownership, activity or the layout of the premises may require new procedures. Likewise, an exemption from a particular licensing requirement does not mean exemption from all applicable rules. Confirm the scope of any exemption with the relevant authority.

3. Distinguish between who advises and who takes action

Franchisors commonly provide guidance and standard designs. That does not, in itself, mean they will handle licence applications, appoint qualified professionals or cover the cost of bringing the premises into compliance.

Create a simple table with four columns: action required, responsible party, supporting document and completion criteria. Include preliminary enquiries, any technical plans required, application submissions, inspections and final approvals.

Ask the franchisor:

• Which documents will it provide for approval applications?
• Does the standard design need adapting to local rules?
• Who appoints and pays the professionals responsible?
• Who follows up on additional requirements imposed by public authorities?
• How will the timetable be handled if an authorisation is delayed or refused?

Brazil’s Franchise Law requires the COF to include information about the support offered and the complete standard contract, including its annexes. Examine these documents to establish the scope of the obligations undertaken. Do not treat the phrase “support with setting up the outlet” as a guarantee of regulatory approval.

4. Make authorisations part of your decision criteria

Review outstanding issues before committing to expenditure that may be difficult to recover. Distinguish between a paperwork requirement that can be resolved and an incompatibility that could prevent the business from operating at that location. Where an answer depends on a technical assessment, obtain that assessment before treating the issue as resolved.

With legal advice, consider how the contract should address the consequences if the necessary licences cannot be obtained: responsibilities, the possibility of an alternative address, deadlines and what happens to money already paid. These arrangements must be negotiated; they do not arise automatically because the outlet has been unable to open.

Also observe the statutory advance disclosure period for the COF: it must be provided at least ten days before you sign a contract or preliminary agreement, or pay any fee to the franchisor or a person or company connected with it. This is a minimum interval, not a deadline for completing your checks.

Practical summary: before buying, confirm the business activities, check whether the proposed address is suitable and assign responsibility for each authorisation. Only regard opening as feasible once you understand the outstanding issues and their consequences.