Franchising in Portugal: assess premises before signing a lease

When turning an existing business into a franchise network, approving premises should not depend solely on their location or appearance. A commercially attractive property may need work that exceeds the budget or may not be suitable for the intended activity. Before presenting opportunities to prospective franchisees, the franchisor should define how each site will be assessed, who will check the legal requirements and when it is safe to make commitments.

1. Turn existing experience into selection criteria

The existing outlet provides useful pointers, but its features should not be copied automatically. A long-standing lease with a favourable rent, an exceptional outdoor seating area or proximity to a major customer may explain results that another address cannot replicate.

Create a property requirements sheet, distinguishing between three categories:

• Essential: conditions without which the concept cannot operate, such as accessibility, electrical capacity, ventilation or storage space.
• Adaptable: features that can be addressed through building work, provided the cost and timescale are acceptable.
• Desirable: factors that benefit the operation but do not, on their own, justify rejecting or approving a site.

Link each requirement to an operational reason. Rather than simply asking for a ‘good shop window’, explain which products need to be displayed and how the entrance should allow customers to move through the premises. If deliveries are frequent, assess access and loading and unloading options.

Also define grounds for rejection. A franchise network grows more consistently when it can turn down unsuitable premises, even when a prospective franchisee is enthusiastic about them.

2. Confirm legal and technical feasibility

Portugal has no specific franchising law or compulsory register specifically for franchisors. The general rules of the Portuguese Civil Code on contracts and good faith apply, among others. The European Code of Ethics for Franchising is a self-regulatory instrument, not an administrative licence to open premises.

Internal approval by the franchisor therefore does not replace the legal requirements applicable to the activity and the property. Depending on the circumstances, checks should cover Portugal’s Legal Framework for Urban Development and Building (Regime Jurídico da Urbanização e da Edificação), the rules governing access to and operation of retail, service and food-service activities approved by Decree-Law No. 10/2015, and the relevant municipal rules. Some activities also have their own requirements.

Before taking on binding obligations that cannot be reversed, commission a review of the documents and technical conditions to establish:

• Whether the property’s permitted use is compatible with the intended activity and what procedures may be required.
• Whether the proposed works are feasible, including façade alterations, fume extraction or equipment installation.
• The applicable accessibility, fire safety, noise and hygiene requirements.
• The permissions required from the landlord and, where necessary, the building’s condominium owners’ association.
• The conditions governing external advertising, outdoor seating areas or use of public space, if these form part of the concept.

Use suitably qualified professionals and clarify any uncertainties with the local municipal council or the relevant authorities. Do not accept ‘a similar business used to operate here’ as sufficient evidence: the activity, premises or legal framework may have changed.

3. Assess the total cost of occupying the premises

An apparently attractive rent can conceal substantial investment costs. The assessment should cover the cost of making the property ready to operate, not just the advertised monthly rent.

Prepare a site-specific budget covering design and planning, building work, equipment, utility connections, administrative procedures and professional fees. Add security deposits, rent payable before opening, insurance and a contingency allowance appropriate to the property’s condition.

Separate estimates from confirmed quotations. Record the source and date of each figure, along with the supplier’s exclusions. A building works quotation that excludes heating and cooling systems or electrical upgrades does not represent the full investment required.

Also test the impact of delays: who pays the rent if opening is postponed? How long can the franchisee manage without revenue? Does the budget remain viable if additional work is needed?

Compare the term and conditions of the lease with those of the franchise agreement. Renewals, building works and obligations to reinstate the premises should be reviewed together, with legal advice, to prevent mismatched commitments from creating unanticipated periods of financial exposure.

4. Formalise a staged approval process

Establish a straightforward process: initial commercial assessment, technical and legal checks, a validated budget and a final decision. At each stage, identify the person responsible, the documents required and any outstanding issues.

The written decision should identify the property assessed, the version of the plans reviewed, the conditions of approval and the circumstances that would require a fresh assessment. Significant changes to the premises or proposed works should not automatically be covered by an earlier approval.

If the property needs to be reserved before the checks are complete, negotiate terms, with legal advice, that address the feasibility of the activity, permissions and the ability to withdraw. Simply calling an agreement a ‘reservation’ does not make the commitment reversible.

Also make clear that the franchisor’s approval assesses suitability for the concept: it does not guarantee turnover or replace professional technical opinions or administrative decisions. This distinction should reflect the support actually provided, without excluding legal responsibilities.

In practice: before looking for new premises, prepare a requirements sheet, a checklist and a conditional approval template. Only then proceed with lease commitments that have been properly assessed.