Buying a franchise: what information should you give the franchisor?

Before buying a franchise in Portugal, researching the brand is only part of the process: the franchisor also needs to assess anyone seeking to join its network. The information you provide about your resources, experience and availability may influence both the decision and the terms offered. Preparing an accurate application helps you avoid commitments that do not fit your circumstances and disputes over statements made during negotiations.

1. Understand why information must flow both ways

Portugal has no specific law governing franchise agreements, dedicated register of franchisors or pre-contractual disclosure document with legally standardised content. This does not mean that either party can negotiate without legal obligations.

The general rules of the Portuguese Civil Code apply. Article 227 requires good faith in negotiations and the formation of contracts; Article 762 requires good faith in fulfilling obligations and exercising the corresponding rights. Freedom of contract does not allow parties to override mandatory legal provisions.

When applying for a franchise, this legal framework makes it particularly important to communicate accurately any facts relevant to the viability of the relationship: financial capacity, technical competence, experience and your actual ability to run the business. The duty of good faith does not rest solely with the franchisor.

An application should be neither a promise of success nor an exercise in unchecked self-promotion. It should enable both parties to assess whether they are a good fit. False information or material omissions may give rise to liability, depending on the facts, fault and losses caused; there is no automatic consequence that applies to every case.

2. Separate available resources from intentions

When presenting your financial position, distinguish between money that is actually available, funds committed to other purposes and financing that still requires approval. An expectation of obtaining credit is not the same as having secured funds.

Prepare a dated summary with clear categories:

• Available personal funds: amounts you can commit to the project, noting any relevant restrictions.
• Confirmed financing: the terms of approval and any requirements still to be met.
• Financing under review: pending applications, without presenting them as guaranteed.
• Third-party contributions: investment from business partners or relatives, distinguishing firm agreements from preliminary discussions.
• Other commitments: obligations that could materially reduce your ability to invest in or sustain the business.

You do not need to send financial documents indiscriminately at the first point of contact. Ask what information is needed, for what purpose and who will receive it. When supporting documents are requested, look for a way to demonstrate the relevant fact without disclosing information unrelated to the assessment.

If an answer depends on assumptions, set them out in writing. For example, the availability of certain funds may depend on selling an asset. The important thing is not to present that possibility as an established fact.

3. Describe your experience and availability without exaggeration

Your technical competence should also be presented in a way that can be verified. Distinguish between experience as an employee, management responsibilities and running your own business. Working closely with a team is not necessarily the same as recruiting staff, managing rotas and taking responsibility for results.

Put together a short dossier covering your career history, roles held, relevant training and skills you still need to develop. If the activity requires specific qualifications, explain whether you already hold them or how you intend to meet the applicable requirements.

Be equally specific about your availability. State whether you will keep another job, when you can start preparing and what restrictions there are on your working hours. Avoid claiming full-time availability simply because you think it will improve your chances of acceptance.

Ask the franchisor to explain its selection criteria: which are essential, which can be met through training and which depend on other resources. This allows any identified gap to be discussed before it becomes an operational problem.

4. Review your statements and keep them up to date

Read application forms and any declarations included in the proposal or contract carefully. Phrases such as ‘has all the necessary resources’ may be broader than the facts you intend to confirm.

Where standard contract terms are used, Portuguese Decree-Law No. 446/85, as amended, is relevant, particularly its requirements on communicating and explaining those terms. Do not treat a standard declaration as a mere formality: ask for explanations and propose corrections if it does not reflect your circumstances.

Keep copies of the versions submitted, supporting documents and replies received. If a material change occurs — such as an investor withdrawing or financing being refused — communicate it in writing before taking on further commitments. Ask for acknowledgement of receipt and clarify whether it changes the assessment of your application.

Practical takeaway: before submitting your application, classify each statement as a verified fact, an outstanding condition or a forecast. Make that distinction clear to the franchisor and seek legal advice if you are asked to make declarations whose scope you do not understand.