Franchising in Portugal: preparing suppliers for growth

A business may work well in one location but run into difficulties as soon as it needs to supply several outlets. Before turning your company into a franchise network, check whether your suppliers can support expansion without compromising quality, margins or continuity of supply. The aim is not simply to negotiate discounts: it is to build a supply system that works for independent business owners in different locations, with clear responsibilities.

1. Identify what must not fail

Start by listing the products, equipment and external services essential to the customer experience. Include less visible dependencies too: maintenance, packaging, software, consumables and technical support. Equipment that is available to buy but cannot be repaired promptly can become an obstacle to opening new outlets.

Assess each supply requirement against three questions:

• Identity: would a replacement change what customers recognise about the brand?
• Continuity: how long can the outlet operate without it?
• Substitution: is a technically suitable alternative available?

This analysis should establish priorities, not create an obligation to buy everything from the same supplier. An exclusive ingredient may require close control; everyday office supplies may not.

For each critical item, prepare a specification sheet with verifiable requirements: composition, performance, dimensions, storage conditions, compliance documentation and acceptance criteria, as applicable. Avoid vague descriptions such as “premium quality”. The franchisee and supplier need to be able to identify the same fault and know how to resolve it.

2. Check actual supply capacity

A supplier that serves the original outlet well may not have the capacity to deliver small orders to several locations. Ask for information on geographical coverage, available capacity, lead times, minimum order quantities, transport, installation and support. If expansion includes Portugal’s autonomous regions, the Azores and Madeira, assess the specific logistics routes and costs involved.

Do not rely solely on a sales assurance that supply is available. Request a written proposal distinguishing current terms from those dependent on higher volumes. A discount conditional on future purchases should not be presented to prospective franchisees as a guaranteed benefit.

Place test orders for destinations representative of your planned expansion. Record the promised and actual delivery times, the condition of the goods, the documentation received and the response to a complaint. For technical services, confirm who provides local support and the contractual response times.

Also assess the total cost to the outlet: purchase price, transport, storage, waste, maintenance and capital tied up. Buying more cheaply does not mean operating at a lower cost, especially when an excessive minimum order increases waste or takes up space needed to run the business.

3. Define responsibilities and legally compliant purchasing rules

Portugal has no specific franchising law or separate compulsory register for franchisors. This does not remove the need to comply with business registration requirements, tax obligations or any licences required for the activity. The contractual relationship is subject to the general rules of the Portuguese Civil Code, including freedom of contract and good faith in negotiation and performance. Where standard contract terms are used, Decree-Law No. 446/85 also applies.

Purchasing obligations must comply with competition law, notably Law No. 19/2012 and, where applicable, Article 101 of the Treaty on the Functioning of the European Union. Regulation (EU) 2022/720 sets out conditions for the exemption of certain categories of vertical agreements; it does not automatically permit every exclusive supply arrangement.

Before requiring franchisees to use particular suppliers or buy exclusively from them, obtain a legal assessment of the necessity, scope and duration of those obligations. Distinguish between mandatory suppliers, approved suppliers and purchases that franchisees are free to make elsewhere, subject to objective specifications.

Also clarify who places orders, who issues invoices, who is responsible for transport and who handles defects or returns. If the franchisor receives commissions, retrospective rebates or other benefits linked to the network’s purchases, explain the arrangement transparently. The European Code of Ethics for Franchising is a self-regulatory reference, not Portuguese law.

4. Prepare alternatives before the first supply disruption

For each critical dependency, define a contingency response. This could be a second approved supplier, a substitute product validated in advance or a safety stock sized according to consumption, shelf life and replenishment lead time.

Create a simple procedure for urgent purchases: who authorises the alternative, what evidence of compliance is needed and how the change is communicated to outlets. Urgency does not remove safety or traceability obligations.

Keep a record of delays, defects and complaints for each supplier. Review terms when geographical coverage or the number of outlets changes: capacity demonstrated at one stage does not guarantee capacity at the next.

Practical step: before recruiting franchisees, put together a critical supply matrix, written terms and approved alternatives. If an essential dependency remains unresolved, address it before promising that the business can support expansion.