Franchising in Colombia: information to provide before signing

Turning an existing business into a franchise takes more than an attractive proposal. Before accepting money or securing a commitment from a prospective franchisee, you need to explain what you are offering, what obligations they will take on and what support you can provide. A well-organised pre-contractual information pack helps build a franchise network founded on informed decisions and reduces discrepancies between sales promises and the contract.

1. Distinguish legal obligations from good practice

In Colombia, the franchise agreement is an atypical contract: there is no specific, comprehensive statutory framework governing its content. As Colombia’s Ministry of Justice explains on LegalApp, it is governed by the agreed terms and the general rules applicable to commercial contracts. Civil law rules on obligations, consent and contractual validity are also relevant.

The absence of a dedicated law does not remove pre-contractual duties. Article 863 of the Colombian Commercial Code requires parties to act in good faith, without fault, during the pre-contractual stage. Concealing relevant terms or making commitments you cannot fulfil may give rise to liability.

Colombia does not generally require a franchise disclosure document in a prescribed format or subject to a mandatory disclosure period. Do not treat time limits mentioned in regulatory proposals as current legal requirements. Nor is there a general, dedicated franchise register that amounts to state approval of the model; this does not remove ordinary commercial registration obligations or registration requirements applicable to other transactions.

Preparing a disclosure document or information pack is good practice, not official certification. Before using it, seek a legal review that also covers the relevant rules on industrial property, competition and personal data protection.

2. Build an information pack that supports decision-making

The pack should describe your actual offering, not an idealised version of what you hope to develop. For a business starting to franchise, it is especially important to be clear about its existing experience and the capabilities it is still building.

Organise the information into these sections:

• Identity and track record: legal business name, representative, contact details and business experience. Distinguish company-owned outlets from franchised units; if there are no franchised units yet, say so explicitly.
• Scope of the offering: outlet format, permitted activities, proposed location and territorial scope. Explain whether exclusivity is offered and any exceptions; it is not automatic.
• Payments and commitments: initial franchise fee, royalties, advertising contributions and other charges. State how they are calculated, how often they are payable, applicable taxes and any refund conditions.
• Included support: training, support for opening and ongoing assistance. Identify which services cost extra and which tasks remain the franchisee’s responsibility.
• Restrictions and exit: mandatory purchases, approved suppliers, term, renewal, transfer, termination and obligations after closure.

Attach the draft agreement and the schedules needed to understand these points. If a term remains subject to negotiation, label it accordingly. Avoid presenting a territory you have not yet approved, or support you cannot yet provide, as a firm commitment.

3. Disclose information in stages without hiding essential terms

You do not need to reveal recipes, confidential procedures or sensitive information to everyone who asks for an introductory presentation. You can introduce staged disclosure that protects the business’s know-how without preventing a thorough assessment.

At first contact, provide an overview and the basic requirements for prospective franchisees. Once there is genuine interest, use a proportionate confidentiality agreement before sharing confidential information. This agreement should not prevent the prospective franchisee from consulting their advisers under suitable confidentiality obligations.

Before any payment or legally binding signature, provide the material terms of the transaction and allow a reasonable period for review. Set this period as an internal policy, not as a supposed Colombian statutory deadline. If you request a reservation payment, explain in writing what it secures, how long the reservation lasts and when the payment is refundable.

Also apply Colombia’s Law 1581 of 2012 when processing prospective franchisees’ personal data. Request only relevant information, explain its intended purpose and obtain the necessary authorisations. Identity documents and financial records should not circulate unchecked among sales staff or external advisers.

4. Keep records and control document versions

Assign responsibility for updating the pack to one person. Each version should be dated, clearly identified and consistent with the draft agreement used by the sales team.

Keep a record of which documents each prospective franchisee received and when. Record their questions and the relevant answers. An acknowledgement of receipt provides evidence of delivery, but does not by itself establish understanding or remedy misleading information.

If you change an important term, provide the update and allow time to review it before proceeding. Do not leave promises about exclusivity, discounts or support solely in conversations: include them in the appropriate document.

Putting this into practice: bring the offering, draft agreement and sales responses together in a single pack. Check for inconsistencies before recruiting prospective franchisees, and do not accept payments on terms you have not yet explained.