Franchising in Portugal: protecting your business know-how

When turning an existing business into a franchise network, you will need to share what makes it replicable. But sharing does not mean handing over all your information to anyone, without conditions. Protecting know-how means identifying what needs to remain confidential, setting contractual rules and demonstrating practical safeguards in day-to-day operations. The aim is to enable franchisees to work effectively without leaving essential knowledge unprotected.

1. Identify what may qualify as a trade secret

Not everything a business knows constitutes a trade secret. Public opening hours, a standard technique or readily accessible information do not gain special protection simply by being labelled ‘confidential’.

In Portugal, the Industrial Property Code, approved by Decree-Law No. 110/2018, sets out the framework for protecting trade secrets, implementing Directive (EU) 2016/943 in this area. Broadly speaking, information must meet three conditions: it must be secret, have commercial value because it is secret, and have been subject to reasonable steps to keep it secret.

For a business looking to grow through franchising, this could include technical parameters, combinations of processes, internal calculation models or non-public commercial methods. Protection depends on the nature of the information and how it is actually handled, not simply on what it is called.

Start with a simple inventory:

• Information: precisely what you want to protect.
• Value: the advantage it provides and what would be lost if it were disclosed.
• Location: where it is stored and in which formats.
• Access: who needs it to carry out their work.
• Existing safeguards: which controls already prevent unauthorised disclosure.

Do not confuse this exercise with trade mark registration: protecting a distinctive sign does not automatically protect the methods used by the business.

2. Share in stages and on a need-to-know basis

Before starting discussions with prospective franchisees, organise your information into levels. An initial presentation can explain the concept, customer profile and operational requirements without revealing sensitive technical details.

While assessing a prospective franchisee, share what they need to make an informed decision, using a confidentiality agreement where appropriate. Once the franchise agreement has been signed, provide the knowledge essential to running the outlet, with access tailored to each person’s role.

Confidentiality must not be used to conceal material risks or obligations. You can explain the costs of a proprietary process without disclosing all its parameters in advance. If a particular detail is essential to assessing the investment, find a secure way to communicate it rather than leaving it out.

For example, in a maintenance services franchise network, a prospective franchisee could be told which equipment is required and how much it costs before receiving the full technical protocols. The team delivering the service, however, needs sufficient instructions to work safely and to the required standard.

Avoid the opposite extreme, too: restricting access so tightly that franchisees continually depend on head office for routine tasks. Protection should enable controlled knowledge transfer, not prevent operational autonomy.

3. Turn protection into clear obligations

Portugal has no specific franchising law or dedicated compulsory register of franchisors. The relationship is governed by general contract law, including the principles of freedom of contract and good faith set out in the Portuguese Civil Code. During negotiations, good faith may also give rise to duties to provide information and to pre-contractual liability.

The European Code of Ethics for Franchising is a self-regulatory benchmark, not Portuguese law. Its requirements do not replace the legal framework for trade secrets or other applicable rules.

Have the confidentiality agreement and contractual clauses reviewed by a legal adviser. These documents should clarify:

• Which information is covered, including oral communications subsequently documented in writing.
• The purposes for which it may be used.
• Who it may be shared with and subject to which safeguards.
• Which exceptions apply, such as public information or legally required disclosure.
• How to report incidents and co-operate in containing them.
• Which obligations continue after the relationship ends.

If you use standard contract terms, also consider the rules under Decree-Law No. 446/85, particularly the duties to communicate those terms and provide information about them. Do not turn confidentiality into a blanket ban on working: confidentiality and non-compete restrictions are separate matters.

4. Build evidence of protection into day-to-day operations

A signed contract is not enough. Use individual accounts, role-based permissions, strong authentication and access logs proportionate to the risk. Track document versions and avoid sharing sensitive files through personal accounts.

Include employees, consultants and external service providers in these controls. Define who authorises access, who revokes it and how the return or deletion of copies is confirmed, while respecting legal retention requirements. Any monitoring must comply with applicable data protection rules.

Prepare an incident response plan as well: contain access, preserve evidence and seek legal advice before making accusations or demanding deletions that could destroy relevant evidence.

Practical takeaway: before recruiting franchisees, identify the truly critical know-how, assign someone responsibility for each item and check that three elements are in place: contractual protection, controlled access and evidence of the safeguards adopted.