Buying a Franchise in Venezuela: Approval for the Transfer

Buying an established franchise can make it easier to get started, but acquiring its equipment or shares does not necessarily give you the right to operate under the brand. In franchising, a new owner’s entry is usually subject to the contract. Before committing to a purchase price, check what the franchisor must approve and which conditions will apply to you as the buyer.

1. Identify exactly what is being transferred

The phrase ‘franchise sale’ can describe several different transactions. The documentation must specify which is proposed, as each structure affects the continuity of the contract differently:

• Asset purchase: you acquire specified equipment, stock or other assets. The franchise agreement does not automatically transfer into your name.
• Purchase of shares or ownership interests: ownership of the operating company changes, but the company may remain the contracting party. Even so, the agreement may require approval for a change of control.
• Transfer of the contractual position: the intention is to replace the franchisee with the buyer, subject to the applicable scope and consent requirements.
• Termination and a new agreement: the seller ceases operating and the buyer signs directly with the franchisor, potentially on different terms.

Ask for the complete original agreement, its amendments and any correspondence affecting whether it remains in force. Check that the seller owns the assets or rights being offered. If several companies are involved, identify what each is transferring and who has authority to sign.

Do not accept the seller’s verbal notification to the franchisor as sufficient evidence. Notification and approval are different things.

2. Review the legal and contractual rules

Venezuela has no comprehensive franchise-specific law or general statutory pre-contractual disclosure regime equivalent to those in countries that require an offering circular with prescribed content and deadlines. A franchise is a commercial contract without a dedicated statutory framework: its obligations are governed primarily by the Civil Code and Commercial Code, alongside other rules applicable to the transaction.

The Industrial Property Law is relevant to trade mark rights. Tax, employment and competition rules may also apply. The absence of a franchise-specific law therefore does not mean that the parties are entirely free to determine every aspect of their relationship, or that the contract can override mandatory rules.

For this purchase, instruct a Venezuelan lawyer to examine the provisions on transfers, replacement of the operator and changes of control. In particular, check:

• Whether the franchisor’s prior written consent is required.
• Whether the franchisor has a right of first refusal or a similar contractual right to purchase.
• Which requirements the prospective buyer must meet and how compliance must be demonstrated.
• Whether any outstanding breaches could prevent approval of the transaction.
• What consequences the agreement provides for an unauthorised transfer.

A voluntarily provided information circular may help you understand the proposal, but it does not replace the consent required under the agreement.

3. Obtain approval setting out all the conditions

Ask the franchisor to confirm in writing whether it accepts the transfer or requires a new agreement. Its response should identify the buyer, the operating company and the specific franchise unit; general approval of the ‘investor profile’ may not authorise the transfer.

Clarify how long you will be entitled to operate. If you receive only the remaining term of the seller’s agreement, do not value the purchase as though you were obtaining a full new term. If there will be a new agreement, review the final version before completion, not afterwards.

Prepare a list of all costs associated with the change of franchisee: a transfer fee, any initial franchise fee, assessment of the prospective buyer or compulsory training. Ask for the contractual basis, the amount or calculation method, who is responsible for payment and when it falls due. Do not assume that every franchise charges these fees.

It should also be clear which existing obligations you assume, which remain with the seller and which claims the franchisor retains. A private agreement between buyer and seller does not, by itself, oblige the franchisor to release the former franchisee or recognise the new one.

4. Coordinate approval, signing and payment

Negotiate for completion and the main payment to be conditional on obtaining the necessary approval and signing the agreed documents. Set a deadline and specify what happens if approval is refused, arrives late or includes conditions you have not accepted.

Where appropriate, document the transaction through an agreement between the seller, buyer and franchisor. This should set out the effective date of the change, the applicable contract and the allocation of responsibilities. Coordinate the handover of the unit with that date to avoid operating without a contractual basis.

Practical conclusion: do not pay for continuity that has not yet been documented. Before completion, confirm who authorises you to operate, for how long and under which obligations.