Franchising in Portugal: understanding the difference between a franchise and a trade mark licence

A business owner receives a request to open another outlet under their business name. The opportunity seems straightforward: authorise use of the trade mark and charge a fee. But is this a trade mark licence or a franchise relationship? Before recruiting partners, it is worth clarifying the difference. In a franchise network, the brand comes with a transferable business model and ongoing support, not simply permission to use a name.

1. Identify what you are actually granting

A trade mark licence allows a third party to use a trade mark on agreed terms. It may specify products, services, territory, duration and quality requirements. On its own, it does not mean that the owner provides a complete business format or undertakes to offer ongoing operational support.

A franchise relationship usually brings together several elements: use of the trade mark, transfer of know-how, application of business methods, and commercial or technical support throughout the contract. The franchisee runs their own business but belongs to a network with a shared identity and common practices.

The distinction does not depend solely on the contract’s title or whether royalties are charged. A licence may also involve regular payments and quality control. You need to consider the obligations as a whole and how the relationship works in practice.

Draw up an inventory of what you intend to provide:

• Just the trade mark and rules on how it is presented?
• Products for resale, without transferring the full system for running the business?
• Tried-and-tested methods for customer service, production, management and organisation?
• Training in those methods and support throughout the operation of the business?

This inventory helps distinguish permission to use a trade mark from a distribution arrangement or a genuine franchise offering. These arrangements can coexist, but they should not be confused in your proposal to a partner.

2. Match your promises to your ability to deliver

The next step is to check whether what you advertise actually exists and can be passed on. A well-known brand is no substitute for an operational model. Equally, handing over documents does not, by itself, demonstrate that another business can reproduce the customer experience.

Prepare an internal table with three columns: promised element, available evidence and person responsible for delivery. Look for concrete evidence to support each promise. If you promise a customer service method, identify the relevant procedure. If you promise training, confirm its content and who will deliver it. If you promise support, identify the team and resources needed.

For example, a business may have a consistent visual identity and good products but leave purchasing, customer service and organisation entirely to each partner. That calls for a different assessment from a business that transfers proven methods and supports their implementation.

This check is not intended to diminish the value of licensing. Its purpose is to avoid presenting an offering as a franchise when its substance does not yet meet the expectations created. If essential components are missing, it may be better to develop the model before marketing it as a franchise.

3. Understand the Portuguese legal framework

Portugal has no specific law governing franchise agreements. Nor does it have a general mandatory franchise disclosure document regime, with the delivery deadline required under Brazilian law, or a dedicated compulsory public register of franchisors.

That does not mean there are no rules. The Portuguese Civil Code, particularly the freedom of contract provided for in Article 405 and the duties of good faith in negotiations and performance, provides the framework for the relationship. Where pre-drafted terms are used without individual negotiation, the rules on standard contract terms established by Decree-Law No. 446/85 may apply.

Use of the trade mark must comply with the Portuguese Industrial Property Code. Commercial restrictions also need to be assessed under Portuguese and EU competition rules. Depending on the activity, other legal obligations may apply, regardless of what the contract is called.

The European Code of Ethics for Franchising is a self-regulatory instrument, not a Portuguese law of universal application. It is binding within the relevant association framework and serves as a reference for good practice across the franchise sector.

Ask a lawyer to assess the substance of the arrangement. Calling the document a ‘licence’ does not automatically exclude the legal rules applicable to the obligations actually undertaken.

4. Align your sales proposal with the contract

Once you have defined the model, review the sales proposal and the contract together. Both should explain what the partner receives, what remains their responsibility and the limits of the trade mark owner’s involvement.

Avoid advertising a ‘complete business’ if you are only granting rights to use the trade mark. Conversely, if you provide a system and require it to be followed, make the support commitments and mutual obligations clear rather than leaving them to informal discussions.

Before the first agreement is signed, ask someone who was not involved in the negotiations to compare the two documents: would they understand the same relationship from both?

In practice: start by listing the rights, methods and support actually available. Only then, with legal advice, choose the contractual structure and description that reflect the offering.