Buying a franchise: checking trade mark rights

When you buy a franchise, you also pay for the opportunity to trade under a recognisable business identity. But a logo in a presentation does not prove that the business selling the franchise can authorise its use. Checking trade mark rights is an essential part of franchise due diligence: it protects your investment in signage, marketing and reputation before you make any commitments.

1. Identify the trade mark and confirm its protection in Portugal

Ask the franchisor for the precise details of the trade marks you will use, their registration numbers, their owners and the territories covered. Distinguish between the word mark, which covers the name, and the figurative mark or other registered versions. A registration may not cover every version used commercially.

Protection in Portugal may come from a national trade mark registered with the Portuguese National Institute of Industrial Property (INPI), a European Union trade mark registered with the European Union Intellectual Property Office (EUIPO), or an international registration effective in Portugal or the European Union.

A foreign registration does not, on its own, guarantee protection in Portugal. Nor should you confuse registering a company or an internet domain name with registering a trade mark.

Check the official registers and verify:

• The owner and whether the details match the documents provided;
• The status of the application or registration;
• The goods and services covered;
• The expiry date and renewal details;
• Any relevant proceedings or changes recorded in the register.

If there is only a pending application, ask for an explanation of the risks and the consequences if it is refused. Do not treat an application as a right already granted.

2. Check who can authorise use

The trade mark owner may be a different company from the one signing the franchise agreement. This is not necessarily a problem: there may be licences within a corporate group or an agreement allowing an operator to develop the brand’s franchise network in Portugal.

What matters is verifying the chain of authorisation. If the franchisor is not the owner, ask for documents showing that it can grant franchisees the right to use the trade mark. A licence to use the trade mark in its own business does not automatically include permission to sublicense it.

Ask, in writing:

• Does the right to grant franchises cover Portugal and the proposed business activity?
• When does the franchisor’s authorisation expire?
• What happens to your outlet if that authorisation ends?
• Is any further approval needed from the owner?

The agreement between the owner and the franchisor may contain confidential information. If so, seek a verifiable alternative, such as a relevant extract or confirmation from the owner, subject to legal review. A general commercial assurance does not establish the scope of the rights.

3. Understand the applicable legal rules

Portugal has no specific franchise law, dedicated compulsory register of franchisors or pre-contractual disclosure document with legally standardised content. The absence of these mechanisms does not remove the need to check industrial property rights.

The general rules of the Portuguese Civil Code apply, particularly freedom of contract and good faith in negotiations and performance. Concealing a significant restriction on use of the trade mark may have legal consequences, depending on the facts and whether the conditions for liability are met.

For national trade marks, the key legislation is the Industrial Property Code, approved by Decree-Law No. 110/2018, as amended. European Union trade marks have their own framework under Regulation (EU) 2017/1001. Where the agreement contains standard terms that have not been individually negotiated, Decree-Law No. 446/85 is also relevant.

The European Code of Ethics for Franchising provides a self-regulatory reference for the sector, subject to the applicable commitments to comply with it. It does not replace the law or prove ownership of a trade mark. Equally, membership of an association does not remove the need for these checks.

4. Establish who is responsible if the trade mark cannot be used

Before signing, ask for the agreement to identify the rights granted and clarify the procedure for handling a third-party claim. You should know whom to inform if you receive a notice, who will coordinate the defence and how costs will be shared.

Also negotiate what happens if use is prohibited: replacing signage, changing materials, interrupting trading and potentially terminating the agreement. Do not assume that the franchisor will automatically cover every expense.

A clause allowing the brand to be changed deserves particular attention if recognition of the name was a decisive factor in your investment. Ask a lawyer to assess the proposed protections and how they interact with any limitations of liability.

Practical conclusion: before paying or ordering branded materials, confirm three things: valid protection in Portugal, sufficient authorisation held by the franchisor, and clear responsibilities if use is challenged.