Pre-contractual Information for Franchising in Colombia

Before offering a franchise of your business in Colombia, prepare the information prospective franchisees will need to assess the opportunity. A sales presentation alone is not enough: you need to explain what has been proven, what you are offering and which risks remain with the investor. A pre-contractual information pack helps build a franchise network with realistic expectations, without turning projections into promises of success.

1. Understand what Colombian law requires

In Colombia, a franchise agreement is an atypical contract: there is no dedicated law governing it comprehensively. Nor is there a specific, generally applicable regime requiring a franchise disclosure document with mandatory content and a standard deadline for delivery before signing, as there is in some other countries.

This does not mean negotiations are free of legal rules. The general provisions of the Commercial Code apply, as do those of the Civil Code where relevant. In particular, Article 863 of the Commercial Code requires parties to act in good faith and without fault during the pre-contractual stage, and provides for compensation for losses caused by a breach of that duty.

Industrial property is governed by Decision 486 of the Andean Community, and Law 256 of 1996 may apply to acts of unfair competition. These rules do not, in themselves, establish a specific franchise disclosure form.

The Ministry of Justice and the Superintendency of Companies recognise the atypical nature of franchise agreements. An information pack recommended by an association, a voluntary technical standard or a document used in another country should not be confused with a generally applicable legal obligation in Colombia.

The practical consequence: the absence of a mandatory form does not entitle you to withhold relevant information or make unsupported claims.

2. Prepare an information pack that supports an informed decision

The pack should answer the questions a reasonable prospective franchisee needs to resolve before committing. Organise it into short sections, with supporting documents that can be verified:

• Who is offering the franchise: the company's registered name, legal representation, track record and relationship to the business model being offered for replication.
• What experience exists: company-owned and franchised outlets, when they began trading and any significant differences between formats. If there are no franchisees yet, state this explicitly.
• What the prospective franchisee will receive: a description of the business, the scope of training, the support planned and the resources they will need to provide themselves.
• What commitments they will take on: estimated investment, recurring payments, mandatory purchases and the main terms covering duration, renewal and exit.
• What rights underpin the offer: the status of the trade mark and the company's authority to permit its use, clearly distinguishing a pending application from a granted registration.
• Which documents will govern the relationship: the draft agreement and any schedules needed to understand the proposed obligations.

Also disclose any known material limitations. For example, if on-site support is available only in certain cities, this condition must be made clear before the prospective franchisee decides to invest, not afterwards.

The information pack does not replace the agreement, but the two must be consistent.

3. Separate actual results, estimates and targets

The greatest disclosure risk often lies in the financial figures. A company-owned outlet with years of trading history does not automatically demonstrate what a new franchise in another city will earn.

Label each figure according to its nature: historical result, estimate or target. For historical data, specify the period, the type of outlet and what is included. If you present sales figures, do not call them profit. If you show an operating result, explain which expenses, taxes or financing costs are excluded.

For estimates, explain the assumptions used: sales levels, rent, staffing, the owner's involvement and the expected time needed to reach stable operations. Also identify which costs are based on quotations and which still need to be checked locally.

Avoid selecting only the best-performing outlet without explaining why it is considered comparable. Nor should you promise a guaranteed payback period when it depends on variables beyond your control.

A generic risk warning does not put right a misleading presentation. The figures and their assumptions must be clear, rather than relying on qualifications hidden in a final note.

4. Allow time for review and questions

Set an internal policy on when to provide the pack, and allow a reasonable period for prospective franchisees to review it with independent advisers. Present this as your own policy, not as a mandatory statutory period under Colombian law.

Date and version the document, identify its supporting documents and keep a record of delivery. Manage questions and answers centrally to prevent different people from offering conflicting terms. If a significant cost or condition changes during negotiations, communicate that change before asking for a decision.

An acknowledgement of receipt records delivery; it does not prove that everything has been understood or remove liability for inaccurate information.

Action point: before recruiting prospective franchisees, cross-check your sales presentation, information pack and draft agreement. Resolve any contradictions and remove any promise you cannot explain and substantiate.