Franchising in Portugal: managing an exit from the network

Turning an existing business into a franchise network also means preparing for the point when a unit leaves. It is not enough simply to provide for the contract to end: you need to organise the removal of branding, outstanding services and the return of resources. A clear exit procedure protects customers and reduces the risk of a former unit continuing to appear to be part of the network.

1. Separate the end of the contract from the practical exit process

Before recruiting franchisees, distinguish between two questions: the conditions under which the relationship can end and what happens once that termination takes effect. The first requires legal analysis of the applicable grounds, notices and time limits. The second requires an operational plan that can be carried out without improvisation.

Portugal has no specific statutory framework for franchise agreements, nor any compulsory register of franchise networks as such. This does not mean there are no rules. Relevant provisions include the Civil Code principles on freedom of contract, good faith and liability for breach, the rules on standard contract terms where applicable, and Portuguese and EU competition law.

Use of the brand after termination also falls within the scope of the Industrial Property Code. Personal data must be handled in accordance with the General Data Protection Regulation and the Portuguese legislation implementing it. Obligations towards consumers do not disappear simply because a unit leaves the network.

The European Code of Ethics for Franchising is a self-regulatory reference, not a Portuguese law with universal application. Its relevance depends, among other things, on commitments made through association membership and contracts.

Ask a lawyer to bring these elements together in the agreement. An internal procedure should not, by itself, create new penalties or powers to intervene at the franchisee’s premises.

2. Inventory everything that links the unit to the brand

In the original business, the brand identity may appear across dozens of physical and digital assets. Before expanding, prepare an inventory that can be adapted to each unit:

• Building frontages, shop windows, internal signage and vehicles;
• Uniforms, packaging, cards and business documents;
• Local web pages, platform profiles and telephone numbers;
• Booking systems, apps and email accounts;
• Training materials, manuals and other restricted-access content.

For each item, record who owns it, who controls access, what action is required at the end of the relationship and who bears the cost. Removing a logo is not the same as returning an asset: a piece of equipment may belong to the franchisee, even though it must no longer display the network’s branding.

Also define how completion will be evidenced. Dated photographs, return receipts and confirmation that access has been revoked can form part of an exit file. Any verification visit must comply with the agreement and respect the rights of the party entitled to occupy the premises.

For digital assets, avoid relying solely on an individual’s password. Set permissions and responsibilities in advance, in line with each platform’s terms and conditions.

3. Resolve outstanding commitments without leaving customers stranded

A unit may leave with paid orders, repairs in progress, future bookings or unused vouchers still outstanding. The plan should begin by identifying the entity that entered into the contract with the customer and the obligations for which it remains responsible.

Do not assume that the franchisor automatically takes on these commitments. Equally, do not present departure from the network as sufficient grounds to cancel them without consequences. Any proposed transfer to another unit requires an assessment of the contracts, any necessary consents and the handling of the data involved.

Create a list of outstanding matters, with a responsible person, deadline and proposed solution for each. Include advance payments received, customers’ goods held at the unit and unresolved requests for assistance.

Prepare a factual communication stating the date on which the link to the brand ends, the contact details for outstanding matters and who is responsible for each obligation. Avoid public accusations or messages that confuse leaving the network with closing the business.

For stock, establish in advance whether a buy-back arrangement exists, what the acceptance criteria are and how the value will be determined. A buy-back should not be presented as guaranteed unless it has been agreed.

4. Close access, organise documents and settle accounts systematically

Prepare an exit checklist covering tasks before termination, actions on the effective date and subsequent checks. The sequence matters: switching off a system too early may prevent outstanding orders from being resolved or block access to documents that must be retained.

Distinguish between confidential material that must be returned or deleted and documents that must be kept by law. For personal data, do not require a blanket handover of the entire customer database: establish who is the data controller and the lawful basis for each instance of retention, transfer or deletion.

Finish by reconciling amounts, assets and outstanding matters, recording any disagreements as well. A signed acknowledgement of receipt should not be confused with a general waiver of rights.

Practical takeaway: before signing the first agreement, prepare an exit matrix with four fields: task, responsible person, deadline and evidence of completion. Have it legally reviewed and check that it works with the systems the business actually uses.