Franchising in Portugal: selecting your first franchisees

When turning an existing business into a franchise network, choosing your first partners takes more than finding people who can afford to invest. Candidates must be able to manage an outlet, implement the concept and work with the franchisor while retaining their independence as business owners. A structured selection process helps distinguish commercial enthusiasm from genuine readiness to run the business.

1. Define the profile before accepting applications

Start with the practical demands of the operation. If the outlet requires its manager to be present every day, an investor who only wants to monitor results remotely may not be suitable. If it involves managing teams, sales experience is not necessarily a substitute for that skill.

Create an assessment form covering four areas:

• Operational capability: availability, organisational skills and the ability to oversee service delivery.
• Management capability: experience of managing people, costs, purchasing and decisions under pressure.
• Financial capacity: resources sufficient to cover the investment and keep the business running.
• Fit with the network: willingness to learn, respect for the concept and readiness to share relevant information.

Separate essential requirements from skills that can be developed. A lack of experience with a software package can be addressed through training; refusing to follow the concept’s core procedures is a different matter.

Avoid vague criteria such as ‘having an entrepreneurial mindset’. Replace them with observable behaviours: monitoring performance indicators, resolving customer problems or organising staff rotas. Use the same assessment framework for every candidate, and do not change the requirements simply because someone is willing to sign quickly.

2. Verify capabilities with proportionate evidence

The initial interview should explore specific experiences. Rather than asking whether candidates know how to manage people, ask them to describe a situation in which they had to address poor performance: what they did, how they monitored progress and what the outcome was.

Follow up the conversation with an exercise based on the existing operation. For example, present a hypothetical situation involving an absent employee, a delayed delivery and customers waiting. Ask candidates to explain their priorities. You are not looking for a rehearsed answer, but for the ability to make decisions, communicate and recognise when support is needed.

When assessing finances, distinguish between candidates’ own funds, planned borrowing and amounts still subject to approval. Request supporting documents appropriate to the stage of the application, and allow candidates to redact irrelevant transactions or details. Having enough money for the initial franchise fee does not, on its own, demonstrate the ability to fund the whole venture.

Where professional references would be useful, inform candidates and agree in advance who will be contacted. Record verifiable facts, not impressions about their private lives. An observation visit to an outlet can also help both parties understand the practical demands, without turning selection into unpaid work.

3. Align the selection process with Portuguese rules

Portugal has no franchise-specific law or dedicated statutory procedure for approving prospective franchisees. That does not mean there are no rules. The Portuguese Civil Code provides for freedom of contract, notably in Article 405, and requires good faith in the negotiation and formation of contracts under Article 227.

In practice, do not present approval as guaranteed while relevant checks remain outstanding. Explain the stages, the conditions for a decision and who is authorised to communicate acceptance. Avoid encouraging candidates to incur irreversible expenditure on the strength of a mere expression of interest.

If you use forms or undertakings containing pre-drafted terms, the rules on standard contractual terms established by Decree-Law No. 446/85 may apply. The collection of candidates’ personal data must comply with the General Data Protection Regulation and Portuguese Law No. 58/2019: a defined purpose, an appropriate lawful basis, information for data subjects, restricted access and justified retention periods.

The European Code of Ethics for Franchising is a reference point for good practice, including partner selection. It is not Portuguese law and does not automatically bind every business; its application arises, in particular, from relevant commitments associated with trade association membership.

4. Make decisions without confusing recruitment with sales

Wherever possible, involve someone responsible for operations in the decision, alongside the person handling the commercial side of the application. One person can assess motivation; another should scrutinise the candidate’s ability to put the business model into practice.

For each assessment area, record the evidence gathered, outstanding questions and the conclusion. Use three clear outcomes: approved, assessment on hold pending clarification of specific conditions, or not approved. Do not confuse an application on hold with informal acceptance.

Communicate the decision respectfully and retain only the necessary data for a justified period. After the first outlets open, compare your assessments with the difficulties actually encountered and refine the framework.

Practical conclusion: before looking for your first franchisee, prepare a candidate profile, an operational exercise and a proportionate list of supporting documents. Selection should lead to a reasoned decision, not just a signature.