Franchising in Colombia: agreeing how to resolve disputes

Before buying a franchise in Colombia, check what will happen if a disagreement arises that cannot be resolved with a phone call. In franchising, a clear process for raising claims protects the relationship and supports informed decisions. The dispute resolution clause deserves as much attention as your financial obligations: it determines where you can seek to enforce the contract and what resources you will need to do so.

1. Understand which rules support your claim

In Colombia, franchising is an ‘atypical’ contract: there is no specific law comprehensively governing the relationship. This is the position explained by Colombia’s Ministry of Justice and Superintendency of Industry and Commerce. The applicable framework consists of the terms validly agreed by the parties, the general rules of the Commercial Code and Civil Code, and any specific provisions relevant to the matter in dispute.

This does not mean that the contract is your only protection or that every clause is valid. Good faith, mandatory rules and legal limits on freedom of contract still apply. Nor is there a general obligation to provide a franchise offering circular under a dedicated pre-contractual disclosure regime.

Two relevant laws for disputes are Law 1563 of 2012, the National and International Arbitration Statute, and Law 2220 of 2022, the Conciliation Statute. These are not franchise laws: they govern mechanisms that parties can use to resolve their differences.

Have the clause reviewed by an independent legal adviser. The aim is not to prepare for litigation, but to check that the chosen mechanism is accessible and proportionate to your investment.

2. Distinguish between negotiation, conciliation and arbitration

A clause may set out several stages, but it should explain when each one begins and ends. Avoid wording such as ‘the parties will seek an amicable settlement’ without identifying who is responsible or setting deadlines.

Direct negotiation. The parties try to resolve the problem themselves. It is worth specifying who receives the claim, what information must accompany it and how long authorised representatives have to respond. The brand’s internal committee may help, but it is not equivalent to a neutral third party.

Conciliation. A conciliator helps the parties reach an agreement; they do not impose a solution. When the legal requirements are met, a conciliation agreement has significant legal effects: it is binding and prevents the same matter from being litigated again, while the formal record provides a basis for enforcement proceedings. This should not be confused with an informal discussion recorded by email.

Arbitration. One or more arbitrators decide the dispute by issuing an award. A valid arbitration agreement means that disputes within its scope must be referred to arbitration rather than, in the usual course, to the courts. An award is not subject to an ordinary appeal equivalent to an appeal against a court judgment; only limited review mechanisms are available, such as an application to set it aside on statutory grounds.

If there is no applicable arbitration agreement, the dispute will normally go before the competent court, subject to the relevant procedural requirements. Do not assume that choosing arbitration leaves you free to use either route for the same dispute.

3. Check whether you can use the agreed mechanism in practice

A legally available solution may be impractical for a small business. Before accepting the clause, ask for the proposed dispute resolution centre’s current rules and fees, and review the following points:

• Scope: which disputes are covered and how related contracts fit into the arrangements.
• Location and language: where proceedings will take place and whether any stages can be conducted remotely.
• Arbitrators: how many there will be and how they will be appointed, without leaving the choice entirely to one party.
• Costs: administrative charges, arbitrators’ fees, legal representation and any expert evidence.
• Applicable rules: whether the arbitration will be administered by an institution and which procedural rules will apply.

Do not assume that the successful party will recover all its costs or that the franchisor will fund the proceedings. Ask your lawyer for an indicative estimate based on a realistic disagreement, with the assumptions clearly stated.

If the brand is foreign, pay particular attention to any arbitration seat outside Colombia, any language other than Spanish or any choice of foreign law. Whether arbitration qualifies as international depends on legal criteria, not simply on the contract describing it as ‘international’.

4. Put a documented claims process in place

Negotiate a straightforward procedure: written notice, a description of the breach, supporting documents, a specific request and a deadline for responding. Identify valid postal and email addresses, along with a way to prove receipt.

Keep the signed contract, its appendices and relevant correspondence. After a meeting, send a summary and request confirmation; do not treat silence as automatic acceptance.

Amicable settlement stages should not become an indefinite wait. Ask your legal adviser to review their effect on statutory time limits and the possibility of seeking interim protective measures where appropriate. Equally, do not unilaterally suspend payments or other obligations without advice: raising a claim does not, in itself, release you from your commitments.

Practical conclusion: before signing, make sure you can answer three questions: who should receive your claim, who will decide the dispute if no agreement is reached, and how much could it cost to get that far?