Buying a franchise in Colombia: reviewing the premises lease

A brand may approve a location even though the premises are not ready to operate legally or are incompatible with the franchise agreement. When entering Colombia’s franchise market, review the lease as part of the purchase, not as an administrative task to deal with later. The aim is to avoid paying for premises where you cannot yet run the business.

1. Check that the premises are suitable for the business

The franchisor’s commercial approval does not replace legal and technical checks on the property. A good location for attracting customers may have restrictions on use, difficulties with installing equipment or limits on opening hours.

Before committing, request and check the following:

• Property and landlord details: establish who owns the property and, if someone else is signing, what authority they have to let it.
• Permitted land use: check the municipal or district rules that apply to the exact business activity you intend to carry out.
• Shared-property regulations: where applicable, review restrictions on signage, noise, opening hours, waste management and the use of communal areas.
• Technical conditions: check electrical capacity, ventilation, plumbing, accessibility and scope for alterations against the business’s requirements.
• Operating requirements: identify the health, environmental and safety requirements that apply to the activity and municipality.

Ask the franchisor for a written specification of the minimum requirements for the premises. Then have suitably qualified professionals carry out checks where necessary. A landlord’s assurance that a similar business operated there is not enough: the activity, installations and current rules may differ.

2. Understand what the law protects and what you need to negotiate

Colombia has no specific law comprehensively governing franchise agreements, nor a general obligation to provide a franchise-specific pre-contractual disclosure document. The Ministry of Justice describes franchising as an atypical contract, meaning one without a dedicated statutory framework. The agreed terms, the general provisions of the Commercial Code and Civil Code, and duties of good faith apply, alongside other relevant provisions.

This does not mean that everything is at the franchisor’s discretion. The premises lease has its own legal framework. Articles 518 to 524 of the Commercial Code provide protections for certain tenants occupying premises with an established business.

For example, subject to its conditions and statutory exceptions, Article 518 recognises a right to renewal for a business operator who has occupied the property for at least two consecutive years with the same business establishment. This does not guarantee an indefinite right to remain or that the rent will always stay the same.

Law 820 of 2003 governs urban residential tenancies; it should not automatically be used as a reference for commercial premises. Have the lease reviewed with that distinction in mind, and do not assume that the same limits on rent increases or termination rules apply as for housing.

3. Align dates, approvals and payments

The franchise agreement and the lease usually involve different counterparties. A promise by the franchisor therefore does not, in itself, bind the property owner, and a concession from the owner does not change your obligations to the brand.

Draw up a combined timetable covering five milestones: handover of the premises, final approval of the location, authorisation for works, fulfilment of operating requirements and opening to the public. For each, identify the responsible party, the supporting document and the consequences of any delay.

Explicitly negotiate the following points:

• Start of charges: specify when rent, service charges and other amounts become payable.
• Fit-out period: if there is a rent-free or reduced-rent period, set out its duration and which costs you must still cover.
• Outstanding approvals: agree what happens if the brand rejects the premises or a restriction prevents the planned activity.
• Compatible terms: compare the length of the lease with the franchise term and the time needed to benefit from the fit-out investment.

These conditions require written acceptance from whoever must fulfil them. Do not assume that payments will be refunded or that you will be released from your obligations unless this has been agreed or there is a legal basis for it.

4. Clarify responsibility for works and the right to occupy

Define who pays for and authorises each alteration: the façade, extraction systems, utilities, toilets, lighting or structural reinforcement. Distinguish necessary repairs from brand-specific fit-out works, and document the initial condition in a written record and photographs.

Also clarify which improvements will remain in the property, which you may remove and whether you must restore the premises to their previous condition. An investment required by the brand does not automatically give you a right to reimbursement from the landlord.

Check who will be the tenant: you, your company or the franchisor. If you will occupy the space under a sublease or another form of permission, review the main lease and the authority to permit that occupation.

Practical conclusion: before signing, bring together the lease, the franchise agreement and the technical specification for the premises. Do not proceed while their dates, permissions or responsibilities conflict.