Buying a franchise: investigating its litigation history

Before buying a franchise in Portugal, it is worth understanding how the brand handles disputes with its franchisees. A lawsuit does not, in itself, prove that a network is poorly run; nor does the absence of published judgments guarantee a trouble-free relationship. Researching the network’s litigation history helps you assess whether its commercial promises match its practice, without turning rumours into conclusions.

1. Ask for an overview of disputes, not a blanket assurance

The question ‘does the network have any legal problems?’ is too broad and invites unhelpful answers. Request written information about significant disputes between the entity you will be contracting with and its franchisees, distinguishing between pending proceedings, judgments and settlements that have brought disputes to an end.

Choose a review period that makes sense given how long the network has been operating. If the brand operates through several companies or a master franchisor in Portugal, identify which entity was involved in each case. A dispute involving another entity within the same brand may have different implications from one involving your prospective contractual partner.

Where possible, request:

• The subject of each significant dispute: promised support, payments, supplies or other obligations.
• The dates, the status of the proceedings and the outcome, where available.
• The franchisor’s position and the documents supporting it.
• Any changes made within the network to prevent the problem from recurring.

There is no need to insist on names or personal data if an anonymised account allows you to assess the risk. Where confidentiality obligations apply, ask what aggregated information can lawfully be provided.

2. Understand the legal limits on available information

Portugal has no specific law governing franchise agreements, nor a dedicated register of franchisors certifying that they have no disputes. It also does not require a pre-contractual disclosure document with legally prescribed content for franchising.

This does not remove the parties’ obligations. Article 405 of the Portuguese Civil Code establishes freedom of contract, while Articles 227 and 762, in particular, require good faith in negotiations and contractual performance. False information or a material omission may have legal consequences, depending on the facts and whether the relevant conditions for liability are met.

However, there is no automatic right to receive all of the network’s case files, settlements or internal documents. The relevance of the information to the investment decision must be weighed alongside confidentiality and third-party rights. A lawyer can help you frame proportionate requests and assess a refusal.

Where an agreement uses pre-drafted standard terms for acceptance by the other party, the rules on standard contractual terms under Decree-Law No. 446/85 may also apply. The absence of franchise-specific legislation therefore does not mean that every written provision is necessarily valid.

3. Cross-check the answers through independent research

Start by confirming the registered company name and identification number of the entity you will be contracting with. Searching only for the trading name may return results for different companies or miss proceedings involving the company that actually operates the network.

Public case-law databases can help you find judgments, but they do not provide a complete list of all proceedings. Not every judgment is published; some are anonymised, and many disputes end in a settlement. Treat your search as one part of your assessment, never as proof that no litigation exists.

If you find a judgment, examine its context with legal support. Check who the parties were, which facts were found to be proven, what was actually decided and whether there is any information about an appeal. An allegation quoted in a judgment is not the same as a proven fact.

Organise your findings in a simple table: subject, source, date, the brand’s response and any outstanding questions. Keep verifiable documents separate from anonymous comments or unconfirmed accounts. If a contradiction emerges, give the franchisor an opportunity to clarify it in writing.

4. Use the history to inform your buying decision

Recognising patterns matters more than counting cases. A large, long-established network may have several disputes without this indicating a widespread failing. Conversely, repeated disputes over the same commercial promise deserve attention, even if few have reached court.

Above all, assess the brand’s response: does it explain the facts, acknowledge difficulties and set out concrete corrective measures? Or does it simply blame franchisees for every problem?

If the disputes reveal ambiguities relevant to your outlet, ask for clarification in the contract before signing. Do not accept a verbal assurance as a substitute for a clearly defined obligation. If material doubts remain, put the decision on hold until you have sufficient documentation and advice.

Practical takeaway: request a documented history, verify what you can, and assess patterns and responses. The aim is not to find a network with no disputes, but to choose a partner that handles them transparently and responsibly.