Franchising in Colombia: how to agree renewal terms

Buying a franchise is not just about obtaining permission to open: it also means understanding how long you can run the business and what you will need to do to continue. In franchising, a good working relationship is no substitute for a clear renewal clause. Before investing in Colombia, check whether continuing depends on verifiable conditions or on fresh negotiations whose outcome no one can guarantee.

1. Distinguish between renewal, extension and a new contract

Although each contract may use these terms differently, it is worth distinguishing three situations: extending the term of the existing agreement, renewing it for another period on defined terms, or entering into a new contract. What matters is not the name of the clause, but its effect.

A provision stating that the parties ‘may renew by mutual agreement’ is not the same as granting you a right to renew. It means they will still need to reach an agreement. Nor is a sales assurance that compliant franchisees are always allowed to continue sufficient.

Ask for the document to answer these questions:

• Does the franchisee have an option to renew, or is the franchisor’s approval required?
• How long is the next term, and how many renewals are permitted?
• Which financial and operational terms will remain in force?
• Must you accept the brand’s standard contract in use at that time?
• What happens if you apply on time but receive no response?

If you must sign a future contract whose terms are not yet known, do not base your financial plans on renewal being assured. Ask for limits or criteria governing changes to key terms, particularly payments and investment obligations.

2. Understand the protection Colombian law provides

In Colombia, a franchise agreement is an ‘atypical’ contract: it is not covered by a specific, comprehensive statutory framework. It is governed by the agreed terms and the general rules that apply, principally the Commercial Code and, where relevant, the Civil Code. Good faith matters both when negotiating and when performing the agreement.

There is no general, automatic right to renew simply because you have bought a franchise. Whether you can enforce a right to continue will depend on the contract and the particular circumstances. This should not be confused with any rights relating to the lease of the business premises: these are separate legal relationships.

Colombia also has no general mandatory franchise disclosure regime requiring a disclosure document to be supplied within a specified period. The document published by the Ministry of Commerce, Industry and Tourism (MinCIT) in 2021, which proposed a disclosure document and a lead time of twenty working days, was a draft, not a rule that should be presented as being in force.

For this reason, make sure renewal terms are put in writing when you buy the franchise. The absence of specific legislation does not remove duties of good faith or allow validly agreed obligations to be disregarded. A Colombian lawyer should review their scope before you sign.

3. Turn the requirements into a verifiable checklist

A clause making renewal conditional on ‘satisfactory performance’ leaves too many questions unanswered. Propose verifiable criteria: payments being up to date, compliance with specified standards and the remedying of breaches previously notified to you.

If the brand requires you to meet targets, agree how they will be measured, over what period and using which records. Distinguish a serious breach from a minor issue awaiting correction. It is also worth defining whether you will have an opportunity to remedy breaches and how much time you will have to do so.

Structure the process around four milestones: the deadline for requesting renewal, the response deadline, notification of any outstanding requirements and formalisation of the agreement. Specify how notices must be sent and keep proof of receipt.

Also ask who makes the decision and how it will be communicated. If approval is entirely at the franchisor’s discretion, factor that uncertainty into your assessment of the purchase; do not treat renewal as a guaranteed assumption in your financial forecasts.

4. Calculate the true cost of continuing

Renewal may involve more than paying a fee. Ask whether refurbishment, equipment replacement, technology upgrades, additional training or changes to branding will be required. Request a clear distinction between mandatory and recommended work, and clarification of who determines its scope.

For each requirement, record who pays, how the cost is calculated, when the work must be carried out and any potential days of closure. If future amounts cannot be fixed, negotiate ways to estimate them, advance notice requirements or expressly agreed limits.

Compare that outlay with the length of the new term. A substantial investment close to expiry deserves particular attention: buying equipment does not, in itself, extend your authorisation to operate the franchise. Avoid committing to upgrades solely on the strength of a verbal assurance of renewal.

Practical conclusion: before signing, settle three questions: whether you have a right to continue, how you must exercise it and which financial obligations it triggers. If any remain unresolved, treat them as investment uncertainties, not as promises already fulfilled.