Buying a franchise in Venezuela: valuing equipment and stock

When buying an operating franchise in Venezuela, it is not enough for the premises to be fitted out and the shelves fully stocked. Some of those assets may belong to third parties, need repairs or have no commercial value. A properly documented franchise purchase requires a clear distinction between the value of the business and the value of the assets actually being handed over. This guide focuses on checking and valuing equipment and stock before completion.

1. Define which assets you are buying

Ask the seller for an itemised list of furniture, machinery, IT equipment, tools and stock. Avoid accepting a description such as ‘fully equipped premises’: it gives you no way to check for missing items or establish what was included in the price.

For each piece of equipment, record:

• Description, make, model and serial number, where applicable.
• Location, age and working condition.
• Documentation supporting its acquisition and ownership.
• Known repairs, warranties and outstanding maintenance.
• Legal status: owned, leased, on loan or subject to a security interest.

A machine installed on the premises does not necessarily belong to the seller. A supplier may have provided it to support sales of its products. Nor should you assume that buying a device entitles you to use the software licences associated with it.

Also distinguish between buying specific assets and acquiring shares in the operating company. In the latter case, the assets remain the company's property and the buyer faces different risks. A lawyer should clarify the transaction structure before the list becomes a schedule to the contract.

2. Value the actual condition, not the original investment

The original invoice proves that money was spent, but does not, on its own, establish current value. An expensive piece of equipment may be worn out, difficult to repair or no longer meet the brand's operational requirements.

Arrange a technical inspection of essential equipment. It is advisable to test it under normal working conditions and review maintenance records, spare parts availability and repair quotations. A brief demonstration arranged by the seller is no substitute for these checks.

Compare the value assigned to each asset with equivalent alternatives available on the market. Allow for the costs of making it usable: repairs, transport, installation or calibration, as applicable. Avoid deducting twice for the same defect when negotiating.

For stock, compare the accounting records with a physical count. Separate saleable products from goods that are expired, damaged, incomplete, discontinued or held on consignment. Check expiry dates and storage conditions where relevant.

Do not automatically value stock at its retail selling price. That price includes a margin that has yet to be earned and costs the buyer will have to bear. Agree on a verifiable valuation basis and specific treatment for slow-moving products.

3. Turn your findings into contractual terms

Venezuela has no comprehensive franchise-specific law or general pre-contractual disclosure regime equivalent to a mandatory franchise offering circular. Franchise agreements are not a specifically regulated contract type and fall under general rules, including the Civil Code and Commercial Code. Depending on the transaction, tax, industrial property and competition rules also apply.

This does not mean that everything can be freely determined by the contract: mandatory legal provisions must be respected. For an asset purchase, your legal adviser should review the applicable obligations concerning delivery, title and defects, as well as any expressly negotiated warranties.

Include a signed schedule to the sale and purchase agreement listing the assets included and excluded. Add statements from the seller about ownership, existing encumbrances and known defects. Specify who is responsible if a third party claims an item of equipment or a promised asset is missing.

If repairs are outstanding, agree who will carry them out, how they will be checked and what happens if they are not completed. Any retention of part of the purchase price should have a defined amount, purpose and release conditions; it should not remain an informal promise.

4. Adjust the price with a completion stocktake

Between the initial review and handover, the business will continue selling and using stock. Agree on a stocktake close to completion, with both parties involved and a clear cut-off date.

The procedure should set out the valuation formula, exclusions and how discrepancies will be resolved. Record goods in transit, returns and third-party assets separately.

Sign a handover record showing quantities, equipment condition and outstanding issues. Photographs and technical test results can supplement this record, but should not replace written identification of the assets.

Practical conclusion: before paying, make sure each asset has an identified owner, a justifiable value and agreed handover terms. If any of these elements is missing, negotiate clarification, exclusion of the asset or a price adjustment.