Franchising in Venezuela: how to agree minimum sales requirements

Buying a franchise may involve committing to a minimum level of turnover. Receiving a sales estimate is not the same as accepting an obligation with contractual consequences if you fall short. Within a franchise network, a well-defined target helps coordinate efforts; an ambiguous clause can shift risks onto the buyer that are beyond their control. Before signing, check what is being measured, when the requirement takes effect and what happens if you miss the target.

1. Distinguish a sales target from an obligation

Look for references to minimum sales in the contract, its schedules and any documents incorporated into it. They may appear as ‘performance targets’, ‘required turnover’ or ‘commercial commitments’. The label does not determine their effect: what matters is whether the wording links the result to a penalty, the loss of a right or termination of the agreement.

Ask for each measure to be classified in writing:

• Indicative target: used for planning and assessing performance, without a shortfall constituting a breach in itself.
• Obligation to carry out activities: requires specific actions, such as maintaining opening hours or running agreed campaigns, but does not guarantee sales.
• Obligation to achieve a result: requires a defined figure to be reached and sets out the consequences of falling short.

Do not accept figures being described as indicative in a sales presentation while the contract makes them binding. Nor should you confuse minimum sales with minimum royalties: the latter may trigger payments even when turnover is low. Ask for a separate explanation of each obligation if both appear together.

2. Understand Venezuela’s legal framework

Venezuela has no comprehensive franchise-specific law or general pre-contractual disclosure regime equivalent to those in countries that require a standardised disclosure document for franchise arrangements. That does not mean the contract falls outside the law: the Civil Code, Commercial Code and other relevant rules, including competition law, apply.

One important franchise-specific regulatory instrument is the Guidelines for the Assessment of Franchise Agreements, set out in Resolution No. SPPLC-038-99 of 9 July 1999. Among other obligations, the text provides for achieving a minimum level of turnover, subject to certain conditions relating to the protection of rights and the network’s identity and reputation.

These guidelines were issued under the former Law to Promote and Protect the Exercise of Free Competition. They should not be read as automatically authorising any minimum sales requirement. A legal review should consider their scope in light of the current Anti-Monopoly Law and the circumstances of the contract.

There is therefore no universal minimum figure you must accept when buying a franchise. The specific commitment should be negotiated and legally reviewed; its inclusion in a template contract does not, on its own, show that it is appropriate for your outlet.

3. Define a measure you can verify

A workable clause should allow both parties to reach the same result using the same data. Before accepting the threshold, resolve these questions:

• Calculation basis: are sales measured by amounts invoiced or payments actually received? How are taxes, returns, discounts and cancellations treated?
• Period: is the minimum assessed monthly, quarterly or annually? Can a surplus in one period offset a shortfall in another?
• Currency: which currency is the threshold expressed in, and what conversion rule applies where necessary?
• Channels: which sales through home delivery, platforms or corporate orders are attributed to the outlet?
• Start date: is there an initial settling-in period with different targets?

Include a worked example in a schedule, without replacing the contractual definition. Check the effect of seasonality too: requiring the same result every month can distort the assessment.

Negotiate a procedure for reconciling discrepancies in the records before declaring that the target has been missed. The franchisee should be able to see the calculation used and submit supporting records.

4. Link the consequences to the causes

Poor sales do not always reflect a lack of effort. Examine how mandatory closures, significant utility disruptions or product shortages attributable to the supply system will be treated. These events do not automatically remove the obligation: it is worth expressly setting out what evidence is required and whether the threshold should be adjusted or certain days excluded.

The assessment should also take account of the franchisor’s commitments that directly affect operations. If the minimum assumes a particular product range or launch campaign, identify those conditions without turning them into a guarantee of profitability.

Finally, avoid disproportionate automatic consequences for an isolated shortfall. You could propose assessing performance over several periods, jointly reviewing the causes and conducting a documented review of the target when the anticipated conditions change. Any future adjustment should follow an agreed mechanism rather than be left to one party’s unilateral decision.

Practical conclusion: before accepting minimum sales requirements, insist on a verifiable definition, clear conditions for their application and explicit consequences. If you cannot calculate the threshold and understand the risk using your own records, the clause still needs work.