Franchising in Colombia: reviewing confidentiality agreements

Before sharing recipes, processes or internal figures, a franchisor may ask you to sign a confidentiality agreement. This is a reasonable tool in franchising, but it should not prevent you from assessing the investment with independent advice. Before buying a franchise in Colombia, check what information the agreement protects, how you may use it and which obligations will remain if you decide not to proceed.

1. Understand what the law protects and what the agreement adds

In Colombia, a franchise agreement is an ‘atypical’ contract: there is no specific law comprehensively governing the relationship, nor a general pre-contractual disclosure regime exclusively for franchises. The general rules of the Commercial Code and, where applicable, the Civil Code apply, including the duty of good faith during negotiations and performance of the contract.

For confidential information, Andean Community Decision 486, which governs trade secrets, is particularly relevant. Among other requirements, protection depends on the information being secret, having commercial value because it is secret, and being subject to reasonable measures to keep it that way. Simply labelling a document ‘secret’ is not enough.

Law 256 of 1996, on unfair competition, also addresses the violation of trade secrets. The absence of a signed agreement therefore does not mean you are free to disclose or exploit confidential business information.

The agreement may impose obligations covering confidential information more broadly than trade secrets alone. Ask for a clear distinction between the two categories: this helps establish the scope and duration of your commitments. These laws protect legitimate interests, but they do not automatically make every demand from the franchisor a legal obligation.

2. Define the information and its permitted use

Avoid accepting an unrestricted definition covering ‘everything known about the brand’. A useful description identifies specific categories: manuals, formulas, internal procedures, non-public commercial terms or the performance figures of identified outlets.

Ask for the agreement to exclude information you can demonstrate:

• Was already public or became public without any breach on your part.
• Was lawfully known to you before you received it from the franchisor.
• Was received from a third party authorised to disclose it.
• Was developed independently by you, without using confidential material.

For meetings and demonstrations, agree how confidential information shared verbally will be identified. Subsequent written confirmation can reduce disputes about what was said and whether it was confidential.

The permitted use must expressly include assessing the purchase of the franchise. This includes examining its financial and legal viability, without authorising you to copy the business model to compete with it. If you eventually sign the franchise agreement, check that it also allows you to use the know-how needed to run the outlet.

Do not confuse confidentiality with exclusive negotiations: keeping a recipe secret does not, in itself, mean committing to buy the franchise or to stop considering other brands.

3. Ensure your advisers can access the information

An agreement that allows you to receive figures but prevents you from showing them to your accountant seriously limits your investment assessment. Negotiate from the outset who may assist you and on what terms.

You can propose access for your solicitor or other legal adviser, accountant and prospective lender, but only to the extent necessary to assess the transaction. Establish whether they must sign additional undertakings or whether equivalent professional or contractual confidentiality obligations are sufficient.

Also clarify your liability for their actions. Do not accept, without review, unlimited liability for any conduct by third parties over whom you have no effective control.

The document should address what happens when an authority requires information to be provided: compliance with the request, disclosure limited to what is required, and notification to the franchisor where legally permitted. Confidentiality should not be framed as a barrier to complying with the law or legitimately exercising your rights.

For your part, use secure storage, limit access and avoid forwarding documents to messaging groups. Practical precautions matter as much as signing the agreement.

4. Agree what happens if you do not buy

Consider now how negotiations would be brought to a close. The agreement should set out a workable procedure for returning or deleting documents and copies, and ending access. If you need to retain material to meet legal obligations or defend your rights, negotiate a limited exception while keeping it confidential.

Distinguish between the term of the agreement and the duration of the confidentiality obligation. A fixed period may be negotiated for ordinary commercial information; trade secrets may remain protected for as long as they meet the legal requirements. There is no single period suitable for every document.

Also check that the eventual franchise agreement does not contradict what was agreed during the assessment stage. If it introduces new obligations, review them before joining the franchise network.

Practical conclusion: sign only when you can identify what you must protect, lawfully share it with your advisers and end negotiations without ambiguous obligations. Protecting the brand’s know-how and properly assessing your investment are compatible goals.