Buying a Franchise in Venezuela: Reviewing the Letter of Intent

Before signing the final contract, a franchisor may propose a letter of intent to structure the negotiations. In franchising, this document can help the process move forward in an orderly way, but it can also create obligations earlier than expected. When buying a franchise in Venezuela, the priority is to distinguish between what you are exploring, what you are committing to do and which decisions remain open.

1. Separate the intention to negotiate from the obligation to buy

The document’s title alone does not determine its legal effect. A letter labelled ‘non-binding’ may include specific commitments whose scope should be reviewed by a Venezuelan lawyer. Reading the heading is not enough: the full contents and the circumstances of the negotiations matter.

Sort each provision into one of three groups:

• Indicative terms: these describe the transaction the parties are considering, without presenting it as approved.
• Obligations during negotiations: actions intended to be enforceable, such as providing certain documents or covering specified expenses.
• Decisions reserved for the final contract: commitments that should only arise once the agreed conditions have been met and that contract has been signed.

Look for contradictions. For example, a general statement that ‘neither party is obliged to enter into a contract’ is problematic if a later clause says the buyer ‘will acquire the franchise’ on a specified date.

Ask for these ambiguities to be corrected before signing. The letter should also make clear that it does not yet authorise you to operate under the brand or present yourself as an approved franchisee.

2. Understand which rules govern the negotiations

Venezuela has no comprehensive franchise-specific law or special statutory pre-contractual disclosure regime equivalent to those in countries that expressly regulate the provision of this information. That does not mean negotiations fall outside the law.

The Civil Code sets out the general rules on the formation, validity and effects of obligations and contracts. The Commercial Code governs the relevant commercial matters. Depending on the agreement’s contents and the proposed business activity, rules on intellectual property, competition, tax, employment and administrative permits may also apply.

It is important to distinguish this mandatory legal framework from the Code of Ethics for Franchising in Venezuela, associated with Profranquicias. This is a self-regulatory instrument, not a national franchise law. It provides for technical, commercial and financial information to be supplied through the Circular Uniforme de Oferta de Franquicia (Uniform Franchise Offering Circular) before a contract or purchase commitment is signed.

Do not confuse this circular with government registration or assume there is a universally applicable statutory deadline for receiving it. Seek advice on whether the code applies through membership or incorporation into the contract. The letter should not treat your review as complete if relevant documents are still outstanding.

3. Turn outstanding conditions into verifiable steps

The phrase ‘subject to approval’ does not explain who gives approval, what they assess or how you will learn the outcome. To retain a genuine ability to decide, identify the conditions that must be resolved before entering into the contract.

A practical checklist might include:

• Legal review of the final contract and its annexes.
• Confirmation of the funding intended for the purchase.
• Confirmation that each party has obtained the necessary internal approvals.
• Resolution of discrepancies identified during the assessment of the business.

For each condition, specify the responsible person, supporting documentation, review date and method of communication. Distinguish between submitting information and obtaining approval: completing the first step does not guarantee the second.

For example, if you depend on financing, avoid wording that treats a loan application as though the funds were already available. Negotiate how the outcome will be documented and what will happen if the condition is not met.

Also establish who will cover the assessment costs. Do not accept an open-ended obligation to pay ‘all negotiation costs’ without specifying the types of expense, prior authorisation and supporting evidence. These rules must be clear even if you ultimately decide not to buy.

4. Set an expiry date and keep changes under control

The letter should have an expiry date and an explicit mechanism for extending it. Clarify what happens if that date passes without a final contract, and which validly agreed obligations, if any, will continue afterwards.

Keep a dated version, the annexes and any communications that amend the agreement. Identify the people authorised to communicate decisions and require material changes to be documented in a way that is consistent with the signed terms.

Before signing, apply this practical test: you should be able to explain what binds you from today, what remains conditional and when the negotiations end. If any answer depends on a verbal explanation that contradicts the text, pause the signing process and ask for a correction.