Franchise formats in Colombia: what business are you offering?

An existing business may combine in-store sales, services delivered at customers’ premises, in-house production and corporate orders. Franchising it does not automatically mean making all those activities part of the offer. Before marketing it, define the format: the specific business unit that someone else will be able to operate using your brand and know-how. This clarity helps build a franchise network with clear expectations and commitments the franchisor can fulfil.

1. Separate your existing business from the format you will offer

The original outlet will often have accumulated activities over time. Some are essential to its commercial proposition; others depend on specialist facilities, personal relationships or resources that will not be available to the franchisee.

Draw up an inventory of what your business actually does and classify each activity into three groups:

• Included: an essential part of the business being offered.
• Optional: may be added under conditions defined in advance.
• Excluded: neither authorised nor promised within this format.

For example, a bakery may produce goods at its main premises, sell to the public and fulfil corporate orders. Its franchise could be solely a retail outlet supplied by a central production facility. Presenting it as a complete replica of the original bakery would create misleading expectations about equipment, staffing and authorised activities.

Describe the format in a statement that can be checked against the actual operation: ‘A retail outlet selling finished products, with final preparation of selected items but no dough production.’ Avoid phrases such as ‘the complete business’ unless you can explain exactly what they cover.

2. Prepare a scope document before marketing the franchise

A scope document is a tool for internal and commercial use, not a legally prescribed type of document. Its purpose is to keep the description of the business consistent across your sales presentation, discussions with prospective franchisees and the agreement.

Include, at a minimum:

• Customer offering: the product ranges and services the unit will be able to sell.
• Operational activities: what is manufactured, prepared, supplied or provided on the premises.
• Included channels: in-person service, telephone orders, e-commerce or any other channels genuinely covered by the format.
• Required resources: the premises, equipment and staff roles associated with the format.
• What is provided: the know-how, documentation and tools included in the offer.
• Key exclusions: activities of the original business that are not transferred.

For each optional activity, state what assessment is required and what additional resources it involves. Do not advertise it as available if there is not yet a workable way to offer it.

Also distinguish between a tool being provided and having to arrange it separately. If the operation requires software, clarify whether the licence is included, who takes it out and who pays for it. This prevents ‘access to the system’ from being interpreted as free, unlimited provision.

3. Reflect that definition in the Colombian franchise agreement

In Colombia, a franchise agreement is an ‘atypical’ contract: it is not subject to a specific, comprehensive statutory framework. It is governed by the parties’ valid agreements and the applicable general provisions of the Commercial and Civil Codes, including the principle of good faith. The absence of a dedicated franchise law does not remove the business’s legal obligations.

The Ministry of Justice’s guidance on these agreements includes describing the products or services covered by the franchise and the obligations of both parties. Simply identifying the brand is therefore not enough to define the scope of what is being offered.

The agreement should set out the format and specify its authorised activities, included elements and exclusions. An annex can provide a detailed catalogue or specification, provided it is clearly identified and consistent with the main document.

Rules governing particular areas also apply, including Andean Community Decision 486 on industrial property and Law 1480 of 2011 on consumer relations. Authorising an activity in the agreement does not replace the permits or other legal requirements needed to carry it out.

4. Check that every promise describes the same business

Before offering the format, compare the sales presentation, scope document, agreement and operating materials. Look for specific contradictions: a presentation advertising in-house production alongside an agreement limited to selling finished products, for example, or a sales catalogue listing services that have not yet been developed.

Ask someone who was not involved in designing the offer to explain what business they would receive. If their understanding differs from what you intend to provide, revise the documentation before proceeding.

Practical application: complete a one-page table with four columns: activity, included or excluded, required resources and franchisor’s commitment. Do not market the format until you can explain every row without relying on verbal promises.