Franchising in Portugal: setting boundaries for staff management

Turning an existing business into a franchise network involves more than replicating products and processes: it requires a different approach to managing people. In company-owned outlets, the founder can give instructions directly to employees. In a franchised outlet, that practice requires a different framework. Defining who hires, organises work and takes responsibility for employees helps preserve the franchisee’s independence and avoid disputes from the very first opening.

1. Separate brand standards from day-to-day staff management

Franchising connects legally independent businesses. The franchisor provides the brand, know-how and business system; the franchisee operates the outlet on its own account and assumes the responsibilities that come with running it.

This distinction should be reflected in everyday practice. The franchisor can set standards for presentation, customer service or service delivery, within legal and contractual limits. But defining those outcomes is not the same as taking over the day-to-day management of another company’s employees.

Before expanding, identify the decisions currently made by the founder. Divide them into two categories:

• Common standards: service specifications, technical procedures, hygiene requirements and use of the visual identity.
• Employer decisions: recruitment, pay, individual working hours, annual leave, employee performance appraisals and disciplinary action.

For example, the brand can define a procedure for welcoming customers. Allocating employees to the shifts needed to implement it is the responsibility of their employer, in compliance with employment law. Both the franchisee and head office staff should understand this boundary.

2. Turn independence into documented responsibilities

Portugal has no specific legislation governing franchise agreements. The general rules on contracts in the Portuguese Civil Code apply, including freedom of contract and good faith. Competition rules are also relevant, as is Decree-Law No. 446/85 on standard contract terms where contractual provisions have been drawn up in advance without individual negotiation.

Staff management is subject to the Portuguese Labour Code, enacted by Law No. 7/2009, as well as occupational health and safety rules and any applicable collective bargaining instruments. The absence of franchise-specific legislation does not remove these obligations.

The agreement should identify the franchisee’s responsibility for managing its employees. However, a contractual declaration of independence is no substitute for consistent practice. The legal classification of employment relationships also depends on the actual circumstances, not simply on the label chosen by the parties.

Prepare a simple matrix with three columns: decision, responsible party and permitted head office involvement. Include recruitment, induction, technical training, staff rotas, incidents and reporting of shortcomings. Seek a legal review if the operating model involves frequent franchisor involvement with local teams.

3. Support recruitment without taking the employer’s place

A brand can help define skills profiles, provide job advert templates and suggest interview questions. This support makes it easier to replicate the concept, particularly when the business depends on specialist technical knowledge.

However, the process must make clear who the employer is. Job adverts and interviews should not leave candidates with the impression that head office will employ them when they will actually work for the franchisee’s company.

Organise support into clear stages:

1. The franchisor describes the skills needed to deliver the concept.
2. The franchisee adapts the profile to the outlet’s needs and legal obligations.
3. The franchisee runs the selection process and decides whom to hire and on what terms of employment.
4. Brand training is coordinated with the employer, without confusing technical certification with disciplinary authority.

If head office receives applications to forward to franchisees, it must also define the purpose of processing, the recipients and data retention periods, in accordance with the GDPR and applicable Portuguese legislation. Avoid creating a CV database that is indiscriminately accessible across the network.

4. Define how to report operational shortcomings

The greatest risk of blurred responsibilities arises during outlet visits. Faced with poor customer service, a brand representative may be tempted to reprimand an employee or immediately change their working hours.

Instead, establish a reporting process in advance: the representative records the failure to meet standards and reports it to the franchisee or designated local manager. The employer decides what staff management measures to take; the franchisor monitors the restoration of the contractual standard.

Also establish procedures for urgent safety situations, without preventing immediate action needed to protect people. Contacts, incident reporting and responsibility for follow-up should all be defined in advance.

Practical takeaway: before bringing your first franchisee on board, review ten routine staffing decisions. For each one, identify who decides and how head office can help. If the answer is still ‘the founder sorts it out’, more work is needed to establish operational independence.