Buying a franchise: testing local demand in Portugal

A well-known brand does not guarantee enough customers in every location. Before buying a franchise in Portugal, investigate whether the concept meets a genuine need in the area where you intend to operate. In franchising, the network’s experience is an advantage, but it is no substitute for local observation. The aim of this analysis is simple: to understand who would buy, why and under what circumstances, before making any commitments.

1. Define the customer and the buying occasion

Start with customer behaviour, not the available premises. A busy street may be poorly suited to an appointment-based service; a residential area may have plenty of inhabitants but little demand for the product during your planned opening hours.

Ask the franchisor to describe the concept’s typical customer and the situations that prompt a purchase. Then turn that description into questions you can investigate:

• Does the customer live or work in the area, or simply pass through it?
• Do they buy to meet a recurring need, for convenience or on impulse?
• Do they travel on foot, by car or by public transport?
• Do they decide on their own, or does the decision depend on someone else, as with certain services for children?
• Do they seek out the service during the week, at weekends or at particular times of year?

Avoid overly vague profiles such as ‘families’ or ‘all ages’. When assessing a quick-service food brand, for example, it is useful to distinguish between workers having lunch near their workplace and residents looking for a takeaway dinner. The same offering may serve both, but the relevant hours, access needs and competition will differ.

2. Observe the area and the alternatives already available

Visit the location on several days and at times relevant to the business. Record the date, the observation period, weather conditions and any unusual events. A local festival or roadworks can distort your initial impression.

Observe relevant footfall, not just the number of people. Do passers-by have a reason to buy that product? Can they see the entrance? Can they stop, park or reach the premises easily? Are there physical barriers that make a short distance impractical to cover?

Map the available alternatives too. Competition is not limited to brands with an identical offering: a supermarket may compete for ready-meal purchases, while a home-based service may replace a visit to business premises.

The absence of competitors does not prove there is an opportunity. It may indicate unmet demand, but it may also mean there are too few customers. Equally, several similar businesses may signal established demand or fierce competition for customers.

Supplement your observations with publicly available information from Portugal’s National Statistics Institute (INE) and the local authority on population, employment, mobility or urban development projects. Check the date and geographical coverage of the data: a figure for the whole municipality may tell you little about a particular street.

3. Compare the brand’s proposition with local evidence

Ask the franchisor to explain the criteria used to assess whether a location is suitable. If they provide examples of successful outlets, find out whether those locations are genuinely comparable in terms of the size of the town or local area, the presence of offices, accessibility, seasonality and customer profile.

Do not treat the brand’s approval of the location as a guarantee of results. Ask what analysis was carried out, what its limitations were and which assumptions still need to be confirmed.

You can supplement this work with brief conversations with potential customers. Ask how they currently meet that need, what they value and what would make them switch. ‘Would you buy here?’ tends to produce less useful answers than questions about purchases they have actually made.

Organise your findings in a simple framework:

• Hypothesis: there is demand for convenience at the end of the day.
• Evidence: observations of footfall and habits described by potential customers.
• Uncertainty: does footfall hold up outside the busiest months?
• Next step: repeat the observations at a different time of year.

Do not conduct trial sales under the brand without permission or collect unnecessary personal data. Before running a commercial trial, check the applicable legal and operational requirements.

4. Record your findings before deciding

Portugal has no specific law governing franchise agreements, nor does it require a standardised pre-contractual disclosure document specifically for franchising. General contract rules apply, including freedom of contract under Article 405 of the Portuguese Civil Code and the duties of good faith in negotiations and performance under Articles 227 and 762.

These rules do not remove the prospective franchisee’s responsibility to investigate, nor do they turn a commercial assessment into a promise of success. Keep the relevant information supplied by the brand and request written clarification of any claims about local demand that are crucial to your decision. If location analysis is among the contracted services, seek legal advice to clarify its scope.

Practical conclusion: before proceeding, write a one-page summary of your target customer, the need you have identified, the alternatives already available and the questions still unanswered. If your choice of brand depends on an unconfirmed assumption, investigate it before signing.