Buying a franchise: remedying breaches

Before entering the franchise market in Portugal, it is important to understand how a network responds when things go wrong. An operational failing should not automatically be treated as a breach that justifies terminating the contract. When assessing a brand, check whether the agreement sets out a clear procedure for reporting problems, allowing them to be remedied and confirming that they have been resolved — including when the franchisor is at fault.

1. Identify breaches and opportunities to remedy them

A remedy period, sometimes called a cure period, is the time allowed to put a breach right. It may allow you, for example, to settle an overdue payment, submit a report or reinstate a mandatory operating procedure. Do not assume, however, that every contract includes such a period or that it applies in every situation.

Ask the franchisor to identify three categories in the draft contract:

• Failings that can be remedied following notice.
• Repeated failings that may have different consequences, even after they have been remedied.
• Breaches considered serious enough to trigger immediate action.

Pay particular attention to vague phrases such as ‘any breach of the network’s rules’ or ‘conduct detrimental to the brand’. Ask what specific circumstances might fall within these categories and who verifies them.

The seriousness of a breach does not depend solely on how the contract labels it. A legal review should assess both the clause and the relevant legal framework. The aim of negotiation is to reduce uncertainty, not to secure tolerance for problems that compromise safety or the lawful operation of the business.

2. Confirm when the period starts and ends

A seemingly adequate period may be of little use if the notice reaches the wrong address or fails to explain what needs to be put right. Read the notice provisions alongside the clauses dealing with breaches.

Before signing, seek written answers to these questions:

• Must notice be sent by letter, email or the network’s platform?
• Which address is valid for notices, and how can it be updated?
• Does the period begin when notice is sent, when it is received or on another specified event?
• Is it measured in working days or calendar days?
• What documents demonstrate that the problem has been resolved?

Propose that any notice should identify the obligation concerned, describe the facts, specify the remedy required and explain the possible consequences of failing to respond.

Also check whether the time allowed is realistic for the task. Submitting a document that is already available does not require the same effort as repairing premises or equipment where specialist technical support is needed. Where the solution depends on third parties, try to negotiate a mechanism for an extension on justified grounds or a staged remedial plan. There is no single contractual remedy period suitable for every breach.

3. Check whether the procedure also protects the franchisee

Do not assess the contract solely by looking at the investor’s obligations. Identify the franchisor’s specific commitments and check what happens if they are not met.

Suppose technical support expressly promised in the contract is not provided. The franchisee should be able to establish whom to notify, what response to expect and how the resolution will be documented. A general promise of ‘ongoing support’ makes it harder to determine exactly what has not been delivered.

Try to negotiate a procedure that includes:

• A designated contact responsible for receiving complaints.
• A deadline for responding and, where appropriate, remedying the problem.
• A mechanism for escalating the matter to another responsible person within the network.
• A written record of the agreed measures and their implementation.

Reciprocity does not necessarily mean identical deadlines for different obligations. It means that the contract also provides a way to hold the franchisor to its commitments. Do not unilaterally suspend payments in response to a failing: that decision requires legal assessment and could create a further breach.

4. Consider the clauses under Portuguese law

Portugal has no franchise-specific legislation, dedicated register of franchisors or pre-contractual disclosure document with legally prescribed content. This does not mean that a contract can override all legal protections.

The general rules of the Portuguese Civil Code apply, including freedom of contract under Article 405 and good faith in negotiations and the performance of the contract under Articles 227 and 762. The consequences of a breach depend on the obligations undertaken, the facts and the applicable legal rules.

Where standard contract terms are used, Decree-Law No. 446/85, as amended, is also relevant, particularly regarding the communication and explanation of those terms. The inclusion of a clause in a signed document does not, in itself, guarantee its validity.

Ask a lawyer to test the procedure against two specific examples: a remediable breach by you and a remediable breach by the franchisor. Check that the answers follow from the wording of the contract, rather than just from sales explanations.

Practical takeaway: before buying, understand who gives notice, what needs to be demonstrated, how much time is available to put matters right and how resolution is confirmed. A clear procedure protects the relationship and helps prevent a remediable problem from becoming a larger dispute.