Franchising in Portugal: choosing your first franchisee

Your first franchisee should not simply be whoever is quickest to commit to investing. To turn an existing business into a cohesive franchise network, you need to choose someone who can run an outlet, follow shared methods and work with the franchisor. A documented selection process reduces enthusiasm-led decisions and helps both parties assess whether the partnership makes sense.

1. Define the profile before advertising the opportunity

Start with the actual demands of the operation, rather than an image of the ideal candidate. If the business requires the person in charge to be there every day, do not recruit an investor who intends to oversee everything remotely. If it requires active sales prospecting, administrative experience is no substitute for the ability to win customers.

Create an assessment form with three groups of criteria:

• Essential: availability to run the operation, demonstrable financial resources and any qualifications legally required for the activity, where applicable.
• Developable: proficiency in management software, product knowledge and the ability to carry out procedures that will be taught.
• Alignment: willingness to undertake training, respect for shared standards, transparency and the ability to resolve disagreements.

Link each requirement to evidence. Availability can be discussed using a proposed weekly schedule; leadership can be assessed through specific situations the candidate has experienced. Avoid vague criteria such as ‘having an entrepreneurial spirit’, which each interviewer may interpret differently.

Also define grounds for putting an application on hold: contradictory financial information, unwillingness to take on the agreed management role or a stated intention to change essential elements of the concept.

2. Organise a staged assessment

A gradual process avoids requesting sensitive documents too early and allows you to devote time to the most suitable candidates.

Initial conversation: explain the day-to-day work, including less appealing tasks, demanding hours and management responsibilities. Ask why the person has chosen this business and what support they expect from the franchisor. Make clear that this is an independent business carrying its own risks, not a job with a guaranteed income.

Structured interview: ask all candidates the same core questions. How would they respond to a complaint? What would they do if sales fell? How would they resolve a conflict with an employee? Ask for examples from their past experience and distinguish proven experience from hypothetical answers.

Observation at an outlet: allow the candidate to observe a representative part of the operation, while protecting customer data and confidential information. The aim is to understand the reality of the business, not to obtain unpaid labour. Any actual participation in tasks must be covered by appropriate arrangements agreed in advance.

Management exercise: present a fictional case involving lower-than-expected sales, staff absenteeism and a complaint. Assess priorities, reasoning and respect for procedures. Do not look for a rehearsed answer: look for the ability to make decisions and ask for support.

Record evidence after each stage. Where possible, involve someone from operations as well as the person responsible for recruitment.

3. Verify resources and expectations without promising results

Having enough money to buy into the franchise does not mean having the resources to sustain the outlet. Assess separately the funds allocated to the initial investment, the business’s working capital and the candidate’s personal expenses during the start-up period.

Ask for a clear explanation of the source of funds, existing financial commitments and any reliance on borrowing. Finance that is still awaiting approval should not be treated as available capital. Request only supporting documents proportionate to the stage of the process, and allow candidates to redact irrelevant bank transactions.

Explore their tolerance for risk too: can the candidate withstand a slower start? Do they need to draw money from the business immediately? Who will take over management if they are unable to work?

Do not confuse this assessment with personalised financial advice. Encourage candidates to have the figures and assumptions reviewed by an independent accountant. If you present results from existing outlets, explain the context and any relevant differences; do not turn them into a promise of individual earnings.

4. Follow Portuguese rules and document the decision

Portugal has no specific franchising law, no dedicated compulsory register of franchisors and no legally prescribed pre-contractual disclosure document. This does not remove duties to provide information: Article 227 of the Portuguese Civil Code requires good faith in negotiations. Article 405 sets out the principle of freedom of contract.

Where standard contractual terms are used, Decree-Law No. 446/85 also applies, including its duties to communicate terms and provide information. Documentation and recruitment practices should undergo legal review, particularly any claims about results and commitments made before signing.

The European Code of Ethics for Franchising is not Portuguese law. It is a self-regulatory instrument for the members it covers and recommends selecting candidates after reasonable investigation of their abilities and resources.

Personal data collected is subject to the General Data Protection Regulation and Portuguese Law No. 58/2019. Establish a lawful basis for processing, specify the information to be given to candidates, and set access controls and retention periods.

Conclude with a reasoned decision: approve, defer until conditions are met, or reject. In practice: do not accept the first available candidate; choose the first who demonstrates the ability and resources to manage the business and collaborate responsibly.