Franchising in Portugal: preventing and resolving disagreements

Turning an existing business into a franchise network also means preparing for disagreements. A disputed charge, unclear guidance or a late response can strain the relationship between independent business owners. Before signing the first agreement, establish a procedure for reporting problems, checking the facts and seeking solutions, without treating a complaint as a proven breach of contract.

1. Understand the procedure’s legal limits

Portugal has no specific law governing franchise agreements in their entirety. A franchise agreement is an atypical contract, governed by the principle of freedom of contract set out in Article 405 of the Portuguese Civil Code and other applicable general rules, including good faith in contract negotiations and performance.

Where a franchisor presents pre-drafted terms that have not been individually negotiated, the rules on standard contract terms, introduced by Decree-Law No. 446/85 of 25 October, as amended, may apply. A disagreement resolution procedure must not be used to override mandatory legal rights or place disproportionate obstacles in the way of exercising them.

Portuguese and EU competition rules also apply. An agreement reached at a meeting between a franchisor and a franchisee does not legitimise a prohibited practice, such as imposing minimum resale prices.

The European Code of Ethics for Franchising is a self-regulatory framework, binding on those covered by the relevant membership or contractual commitments; it is not Portuguese legislation that applies universally. Cooperation within a franchise network should therefore be reflected in practical procedures that have undergone legal review.

2. Create a clear channel for raising disagreements

Do not leave conflict management dependent on personal contact with the founder. As you prepare to expand, appoint someone to take responsibility and establish a communication channel that preserves a record, with access restricted to those who need to be involved.

The initial record should include:

• Details of the outlet and the person raising the issue.
• An objective description of what happened and the relevant dates.
• The contractual obligation or operational guidance in question.
• The documents needed to understand the problem.
• The impact on operations and the requested solution.

Distinguish between queries, complaints and alleged breaches. A question about an invoice should not automatically trigger a formal notice threatening sanctions. Equally, a risk to customer safety must not be left in a routine administrative queue.

Set realistic internal deadlines for acknowledging receipt, gathering information and responding. Identify these as organisational or contractual commitments, as appropriate, rather than universally applicable statutory deadlines. Provide a fast-track route for situations requiring immediate action.

3. Separate fact-finding from decision-making

The person who issued disputed guidance may help clarify the facts, but should not necessarily be the sole decision-maker. In a small organisation, a second review by management or an external adviser can reduce defensive decision-making.

Before the meeting, cross-check the agreement, relevant documents and correspondence. Confirm which version of the guidance applies and whether it was actually communicated. Avoid requiring a franchisee to comply retrospectively with an instruction they were unaware of.

Imagine that an outlet disputes a charge because it considers the service concerned to be already included in the agreement. The first step is to check the contractual description, invoicing and service delivered, rather than assume an unwillingness to pay.

The response should distinguish between confirmed facts, points still in dispute and the proposed solution. If corrective action is needed, specify who will carry it out, by when and how it will be checked. Record any disagreements too: meeting minutes must not present something as agreed when one party has rejected it.

4. Plan proportionate escalation and learn from each case

Establish a simple sequence: operational assessment, management review and, where appropriate, an attempt at mediation with an independent third party. Mediation seeks to facilitate an agreement; it is not equivalent to a court ruling imposed on the parties.

Seek legal advice before including clauses on court jurisdiction or arbitration. Do not copy approaches from other countries without assessing their validity, costs and suitability for the relationship in Portugal. The internal procedure should preserve access to urgent legal remedies and must not be presented as automatically suspending statutory deadlines.

After closing each case, look for recurring causes: ambiguous wording, contradictory information or a communication failure. Share lessons learnt without unnecessarily disclosing personal data or an outlet’s confidential information.

Practical application: before recruiting franchisees, prepare an issue-reporting form, appoint a person responsible and run through a simulated disagreement over a charge. If nobody knows who should respond or how to justify the decision, the procedure still needs work.