A franchise’s track record: how to assess a brand’s experience

A long-established brand is not necessarily an experienced franchise. It may have operated from a single location for years and only recently started franchising. For anyone considering joining a franchise network, understanding this distinction helps you choose a business with evidence that matches the risk you are taking. The aim is not to rule out new brands, but to establish what has already been tested and what will still depend on your outlet to prove itself.

1. Separate the brand’s age from its franchising experience

Start by drawing up a timeline with distinct milestones: when the business began, when the first company-owned outlet opened, when the model being offered was launched and when the first franchisee joined. Also ask when any significant changes were made to the format, target customers, products or sales channels.

These dates answer different questions. Years of trading may demonstrate experience in serving customers, but they do not, on their own, prove that the business works in other towns and cities or without the founder’s day-to-day presence.

Brazil’s Law No. 13,966/2019, the current Franchise Law, requires the Franchise Disclosure Document (Circular de Oferta de Franquia, or COF) to include a brief history of the franchised business. It also requires identifying details of the franchisor and its associated companies, along with a detailed description of the franchise and the franchisee’s activities.

Use this information as a starting point to check the sales pitch. If the presentation mentions decades of experience, identify whose experience this refers to: the company’s, the brand’s, the founders’ or that of another business they previously managed.

The Franchise Law does not require a business to operate for a minimum of one or two years before it starts franchising. Recommendations about allowing a business to mature should not be presented as legal requirements. Equally, being able to offer franchises does not prove that the model has been sufficiently tested.

2. Look for an operation comparable to the one you will buy

Ask to visit an outlet that represents the format actually being offered. A large shop in an established location may not be a suitable benchmark for a kiosk, a home-based business or an outlet in a smaller town.

Compare specific features:

• premises, equipment and capacity to serve customers;
• customer profiles and methods of attracting business;
• the mix of products or services sold;
• the number of people needed to handle day-to-day operations;
• the founders’ direct involvement in running the business;
• how long it has operated in its current format.

Where possible, observe the outlet at different times, including a quiet period. A visit arranged for prospective franchisees may reveal only part of the daily routine.

Ask which activities rely on the founder’s personal knowledge and how that knowledge has been turned into repeatable procedures. Winning business through a reputation built over years, for example, is different from attracting customers in a market where nobody knows the brand.

An outlet presented as a pilot provides useful evidence, but it is not a guarantee of success. What matters is understanding what was tested, for how long and under what conditions.

3. Check what the expansion figures really represent

Claims such as “nationwide presence” or “dozens of outlets” need context. Ask for a breakdown of company-owned outlets, trading franchises, signed contracts for outlets that have yet to open, and operations that have closed. A franchise sold is not the same as an outlet that is open and established.

Law No. 13,966/2019 requires the COF to include a complete list of franchisees, sub-franchisees or sub-franchisors, as well as those who have left the network in the past 24 months, with their names, addresses and telephone numbers. This information helps you check the track record being presented, although it does not replace an explanation of changes within the network.

Organise the data by opening year and format. This will help you see whether the network’s experience is concentrated in a few long-standing operations or many recent openings. Newly opened outlets have not yet demonstrated how they cope with different levels of demand over time.

Do not treat a single closure as automatic grounds for rejecting the network. Investigate the stated reason, the supporting documentation and whether the problem could recur: was the format discontinued? Did the customer base change? Did the operation depend on exceptional local circumstances? Look for patterns, rather than just positive or negative stories.

4. Turn gaps in the evidence into decision criteria

Create a table with three columns: the brand’s claim, the evidence provided and the outstanding question. Also note whether the evidence relates to the format and trading conditions of your proposed outlet.

Classify each point as proven, partly proven or not yet tested. A new network can be a considered choice, provided you do not confuse expectations of expansion with demonstrated experience.

Carry out these checks before making commitments. As a general rule, the COF must be supplied at least ten days before you sign a contract or preliminary agreement, or pay any fee to the franchisor or a person or company associated with it. This is a statutory minimum period, not a requirement to complete your assessment within ten days.

In practice: choose a brand for the experience it can demonstrate in the model you will buy, not simply for how long its name has existed or how quickly it claims to be expanding.