Is there a minimum trading period before a business can franchise in Brazil?

Having traded for a year does not automatically qualify a business to franchise — and trading for less than a year is not, in itself, prohibited by Brazil’s Franchise Law. For anyone planning to enter the franchise sector as a franchisor, the decision requires separating three questions: what the law requires, what experience the business has actually gained, and how to present that track record to prospective franchisees.

What the Franchise Law requires regarding trading history

Law No. 13,966/2019, which governs business franchising in Brazil and repealed Law No. 8,955/1994, does not set a general minimum trading period of one year before a business can start franchising. This supposed requirement should therefore not be used as a legal basis for approving or preventing expansion.

It is also important to distinguish legislation in force from proposed legislation. Bill No. 4,136/2021 proposed adding a requirement for a business to have existed and operated for at least 12 months. Introducing a bill, however, does not make its provisions legally binding.

The absence of this minimum period in the Franchise Law does not remove other obligations. Article 2 requires a franchise disclosure document, known in Brazil as the Circular de Oferta de Franquia (COF), written in Portuguese using clear, accessible language. Mandatory disclosures include a brief history of the business and the franchisor’s balance sheets and financial statements for the two most recent financial years.

These disclosure requirements should not be confused with a minimum business age rule. If the franchisor has not yet completed two financial years, how to present its position should be assessed with legal and accounting support, without inventing reporting periods or substituting another company’s documents without explanation.

Separate the age of the business from the age of the franchisor

A trading business may have a long history yet be managed by a newly incorporated franchisor. The reverse is also possible: a long-established company may have recently adopted a business model in which it has little experience.

Before publicising how many years the brand has been around, draw up a timeline that distinguishes between:

• Existence of the legal entity: when each company involved was incorporated.
• Start of trading: when sales or service delivery began.
• Use of the brand: when the current brand identity was first used.
• Adoption of the model being offered: when the format, target market and commercial proposition to be replicated were introduced.
• Establishment of the franchisor: when the company responsible for the relationship with franchisees was set up.

Support this timeline with verifiable records, such as company documents, contracts, tax invoices and sales reports. The aim is not to create a longer history, but one that can be substantiated.

If a shop traded for years with a different market positioning and has recently changed, its earlier experience remains relevant. However, that experience alone does not establish the maturity of the current model.

Assess what the trading history has actually demonstrated

Elapsed time and useful experience are not the same thing. A company may repeat the same routine for years without discovering whether its proposition works outside very specific conditions. Another may keep well-organised records from the outset but still lack insight into important aspects of customer behaviour.

To decide whether the track record is sufficient, consider practical questions:

• Do customers return, or do results depend mainly on curiosity surrounding the opening?
• Do recorded costs reflect normal conditions, or do they include temporary discounts and personal favours?
• Have there been significant changes to the product, pricing or customer service? Are there records covering the period after those changes?
• Do results depend on the owner’s personal reputation or relationships that a franchisee will not have?
• Are there significant events the business has yet to experience, such as rent increases or the replacement of essential equipment?

Classify the answers as substantiated, partly substantiated or still unknown. For each gap, identify what evidence needs to be gathered and who will monitor progress.

This exercise does not create an additional legal requirement. It provides a management framework to avoid treating the company’s anniversary as proof that it is ready to franchise.

Present the track record without turning experience into a promise

In the COF and in sales discussions, clearly distinguish the business’s history from its actual experience as a franchisor. Running company-owned shops for several years does not mean having supported franchisees for the same length of time.

Avoid adding together the owners’ years of experience to claim an age the company has not reached. Similarly, results achieved before a significant change should be identified as relating to the previous business set-up.

The COF must be delivered at least ten days before the franchise agreement or preliminary agreement is signed, or before any fee is paid to the franchisor or a person or company connected with it. This interval also allows the prospective franchisee to examine the consistency of the track record presented.

In practice: before franchising, prepare a verifiable timeline, identify what your experience has not yet demonstrated, and have professionals review how you present the legal and accounting information. The decision should rest on evidence, not simply on the calendar.