Franchising in Venezuela: how to agree refurbishment terms

Buying a franchise does not mean investing in the premises just once. During the contract term, you may be required to change the frontage, furniture, equipment or layout. Maintaining a consistent image across a franchise network makes sense; accepting future investment commitments without clear limits does not. Before joining a brand in Venezuela, check how these updates will be decided, funded and carried out.

1. Identify what can change and who decides

Look for references in the contract to refurbishment, modernisation, alterations, corporate identity and equipment upgrades. Also review the schedules and any clauses allowing changes to the operations manual. A costly obligation may appear there even if it is absent from the initial budget.

Distinguish between three categories:

• Routine maintenance: repairing wear and tear and keeping the premises in the agreed condition.
• Brand updates: replacing functional items because the visual identity or commercial concept has changed.
• Legal or safety compliance: carrying out work required by an authority or needed to address risks.

These should not all follow the same procedure. An urgent repair may need immediate attention; new décor will usually allow time for budgeting and scheduling.

Ask the franchisor for documented examples of previous updates: their scope, completion times, closures and the costs paid by franchisees. Speak to operators who have been through the process. The aim is not to treat past experiences as guarantees, but to identify obligations that the sales presentation does not explain.

2. Understand Venezuela’s legal framework

Venezuela has neither a comprehensive, dedicated franchise law nor a general pre-contractual disclosure regime equivalent to those in countries that require an offering circular with legally defined content and deadlines. Requesting records of refurbishments is a buyer’s due diligence measure, not a specific mandatory document required under franchise legislation.

The relationship rests primarily on the Civil Code, which governs contracts, obligations and performance in good faith, and the Commercial Code, depending on the commercial nature of the transactions. The Industrial Property Law, Copyright Law and competition rules may also apply.

The Guidelines for the Assessment of Franchise Agreements, issued by Procompetencia, provide a specific administrative precedent for analysing these agreements from a competition perspective. They are not a comprehensive franchise law and do not, in themselves, establish a right to reimbursement for refurbishments. Their application should be reviewed with local legal advisers in light of the current competition regime, including the Anti-Monopoly Law.

Building work may also require municipal authorisation and compliance with technical, safety or health requirements, depending on the property and the business activity. The franchisor’s approval does not replace these permits or the landlord’s consent where required.

Do not confuse negotiated protection with an automatic right: a spending cap, compensation for closure or a special deadline must be expressly agreed, without prejudice to any rights granted by applicable law.

3. Turn the obligation into a manageable budget

Avoid clauses requiring you to make any investment requested, at any time and entirely at your own expense. Propose a written procedure covering the following:

• Technical scope: plans, specifications and the reasons for the change.
• Advance notice: enough time to obtain quotes, arrange permits and manage cash flow.
• Frequency: the conditions under which further updates can be required and how successive rounds of work will be handled.
• Financial threshold: an amount or formula that triggers additional approval or negotiation.
• Cost allocation: what each party pays and how cost overruns are authorised.
• Exceptions: a separate procedure for urgent risks or legal requirements.

If the budget uses a reference currency, specify the payment currency, the applicable conversion mechanism and the calculation date, subject to current regulations. Include taxes, transport, installation, equipment removal and professional fees: the price of the furniture is not the full cost.

Ask for a provision preventing changes to the manual from bypassing this procedure. Also negotiate what will happen if the investment is required close to the end of the contract. A possible renewal should not be presented as a guarantee that you will recoup the expenditure.

4. Protect the business during the work

Prepare one scenario involving full closure and another involving partial operation. Calculate the payments that would continue even without sales: rent, payroll, utilities and financial commitments. Keep the cash needed for these separate from the building works budget.

Agree the timetable, supervision responsibilities and acceptance criteria for the work in writing. Define how delays, defects and changes to the scope will be documented. If you need borrowing, avoid committing to the work on the assumption that finance will be approved.

Also negotiate how contractual payments will be treated during closure, particularly those with fixed minimum amounts. Any reduction, suspension or support should have clear conditions; do not assume that ceasing to trade removes the obligation to pay.

Practical conclusion: before signing, insist on a refurbishment schedule setting out the scope, procedure, costs and contingencies. A clearly defined obligation allows you to maintain the brand’s identity without leaving your cash flow exposed to unpredictable decisions.