Franchise or trade mark licence in Colombia: how to tell the difference

A recognisable brand and an upfront fee are not enough to identify a franchise. Before investing in Colombia, establish whether you are acquiring a business system or simply permission to use a name and sell certain products. This distinction determines what you will need to develop yourself and what you can require from the other party. Understanding it helps prospective franchise investors compare offers without confusing contractual commitments with expectations.

1. Identify what you are really being offered

In a franchise, the franchisor grants the right to operate a business model that includes rights to distinctive signs, such as trade marks, and business knowledge, known as know-how. The franchisee operates as an independent business owner, using their own resources within the agreed conditions.

A trade mark licence, by contrast, authorises the use of a distinctive sign under certain conditions. On its own, it does not mean you will receive a complete method for running the outlet. In a distribution arrangement, the relationship usually centres on selling products: access to stock and promotional materials does not, in itself, amount to a franchise either.

These arrangements can overlap. Do not base your decision solely on the document’s title or how the seller presents the opportunity. Review the full package: what rights you receive, what knowledge is transferred and what enforceable obligations each party has.

2. Check that there is a system, not just a visual identity

To distinguish between the models, ask for a demonstration of how the business works beyond its products and décor. You do not need immediate access to every trade secret; you can request document contents pages, approved examples or a presentation of the operating process.

Look for specific answers to these questions:

• What procedures are already defined? For example, how the service is delivered, quality is controlled and common problems are resolved.
• What knowledge does the franchisor provide? They should be able to explain what business experience they pass on, rather than simply describing the brand’s appeal.
• How is that knowledge passed on? Identify the documents, tools and methods intended to support the transfer.
• What will you need to create yourself? Distinguish local adaptations from essential processes that do not yet exist.

A manual focused exclusively on colours, uniforms and displays sets out visual identity rules, but does not, on its own, demonstrate a complete operating system. Nor does a supplier list replace the procedures needed to run the business.

The decisive question is: if you received permission to use the brand tomorrow, would you also have a clear method for operating the business?

3. Understand Colombia’s legal framework

In Colombia, a franchise agreement is an atypical contract: it is not governed by a dedicated, comprehensive set of contractual rules. As the Ministry of Justice explains, it is governed by the terms agreed between the parties and the general rules applicable to commercial contracts.

This does not mean there is a legal vacuum. Relevant legislation includes the Colombian Commercial Code, the civil law provisions applicable to obligations and contracts, and Andean Community Decision 486 on industrial property. Good faith requirements and mandatory legal rules still apply even if the contract does not repeat them.

It is also important to distinguish legislation in force from a proposal. The document published by the Ministry of Trade, Industry and Tourism in 2021, which proposed a Franchise Offering Circular and its delivery twenty working days in advance, was a draft decree. Publication on an official website alone does not make it a binding legal requirement.

The legal classification warrants professional review: calling a document a ‘licence’ does not automatically determine its nature, just as labelling it a ‘franchise’ does not guarantee that sufficient elements of the business model will be transferred.

4. Base your decision on what you will actually receive

Before accepting, prepare a simple table with four columns: the component offered, evidence that it exists, the contractual obligation and the tasks you will take on yourself. Include the brand, processes, management tools and transfer of know-how.

If a presentation promises a complete system but the contract only grants use of the brand and the supply of products, ask for that discrepancy to be clarified in writing. Do not assume that promotional claims will replace a precise description of the obligations.

A licence or distribution arrangement can be a valid option. Problems arise when you pay and plan on the assumption that you will receive a franchise, only to find that you must build much of the business yourself. In that case, reassess the work, professional advice and resources required, without assigning the provider responsibilities they have not accepted.

Practical conclusion: before buying, set out on one page what you will receive and what you must develop yourself. If that page does not match the contract, clarify the arrangement before committing any money.