Franchising in Colombia: agreeing how to resolve disputes

When buying a franchise in Colombia, understanding each party’s obligations is not enough: you should also know what will happen if you disagree over whether those obligations have been met. A dispute resolution clause can determine where you bring a claim, how much it will cost and which steps you must follow. In franchising, agreeing this procedure helps protect the relationship and prevent an operational disagreement from becoming a dispute that is difficult to manage.

1. Understand which rules support your claim

In Colombia, a franchise agreement is an ‘atypical’ contract: there is no specific law comprehensively governing this type of agreement. The terms validly agreed by the parties apply, alongside the general provisions of the Commercial Code and, where relevant, the Civil Code. Good faith and mandatory legal rules remain binding; the contract is not your only source of protection.

Nor is there a general statutory pre-contractual disclosure regime specifically for franchises equivalent to the mandatory disclosure documents required in some other countries. This makes it particularly important to request the full draft agreement and review the claims procedure before committing any money.

If the parties choose arbitration, the relevant legislation is Law 1563 of 2012, the National and International Arbitration Statute. For conciliation, consider Law 2220 of 2022, which establishes the Conciliation Statute. These are not franchise laws: they govern general dispute resolution mechanisms that can be used in this commercial relationship.

Ask a lawyer to identify which disputes the clause covers and whether it contains requirements that could unjustifiably hinder access to a resolution.

2. Compare court proceedings, conciliation and arbitration

Do not accept a vague reference to ‘amicable resolution’ without understanding what happens if no agreement is reached. Distinguish between three routes:

• Court proceedings: a court with jurisdiction decides the dispute under the applicable rules. Although there are no arbitrators’ fees to pay, you may incur legal representation fees, costs of obtaining evidence and other procedural expenses.
• Conciliation: an authorised third party helps the parties reach an agreement but does not impose a solution. Subject to the legal requirements, a conciliation settlement may be directly enforceable and have the effect of a final judgment, preventing the same matter from being litigated again.
• Arbitration: the parties authorise arbitrators to decide disputes covered by their arbitration agreement. The decision is called an award and is binding; it is not merely a recommendation.

An arbitration clause may direct certain disputes to arbitration rather than the ordinary courts. Before accepting it, request an estimate of fees and expenses under the proposed institution’s rules, where applicable.

Also check the number of arbitrators, the location, the language and the chosen procedural rules. For a locally operated franchise, having to pursue a dispute far from the premises can add travel costs and make it harder to gather or present evidence. Do not assume arbitration will always be cheaper or faster.

3. Set up preliminary negotiations without blocking claims

A stage of direct discussion can resolve differences without damaging the relationship. However, it must specify who is responsible, how communication will take place and a clear deadline, rather than becoming an indefinite wait.

Propose that the contract specify:

• The valid postal or email address for notifying the other party of a disagreement.
• The minimum information required in the notice: the facts, the obligation in dispute and the remedy sought.
• Who receives the claim and who has authority to negotiate.
• The deadline for responding and the point at which this stage is considered complete.
• The next step if there is no response or agreement.

Distinguish between contractual stages and any statutory prerequisites for bringing proceedings. Also, do not assume that emailing a claim suspends the time limits for taking legal action.

Seek advice on preserving your ability to apply for interim protective measures in urgent cases. Preliminary negotiations should not be designed as a barrier that leaves you without protection when immediate intervention is needed.

4. Check that you can use the agreed mechanism

Before signing, work through a simple scenario: you believe an obligation has been breached, and the franchisor denies it. Identify whom you would notify, what evidence you would retain, where you would bring your claim and what upfront payments you would need to make.

Keep the signed agreement, relevant communications and evidence of compliance in an organised file. After a meeting, make a written record of any agreements reached; do not rely solely on verbal conversations.

During a dispute, avoid withholding payments or failing to meet other obligations on your own initiative without advice: this could lead to a further claim against you. Also check whether another contractual document contains a conflicting dispute resolution clause.

Practical conclusion: do not sign until you can explain, on one page, how a claim begins, who decides it and how much it could cost you. A clear, accessible mechanism is worth more than an informal promise to resolve any problem.