Changes in Franchise Ownership in Venezuela

When turning a Venezuelan business into a franchise, it is common to assess the people who will initially run it but overlook the fact that the ownership of their company may change. A new investor, a share sale or a family reorganisation can alter who makes the decisions. Setting rules for these changes helps preserve business continuity and trust across the franchise network.

1. Distinguish ownership changes from transfers of the agreement

If the agreement is signed with a company, that company is the franchisee. Its shareholders do not automatically become parties to the agreement simply because they own shares.

It is therefore useful to distinguish three situations:

• Change in ownership: owners join or leave, but the contracting company remains the same.
• Change of control: the person or group able to direct the company’s decisions changes, even though the company retains its legal identity.
• Transfer of the agreement: the intention is to transfer the contractual position to another person or company, subject to the relevant requirements and consents.

For example, bringing in an investor without management powers does not necessarily mean handing over control of the business. Nor does selling shares, in itself, amount to transferring the franchise agreement.

The practical rule is to identify what is actually changing: ownership, decision-making power, the operator or the contracting party. Avoid a clause that treats all these situations as identical.

2. Set rules that fit Venezuela’s legal framework

Venezuela has no specific franchise law. This does not mean that the parties can agree terms outside the law: the Civil Code governs obligations and contracts, while the Commercial Code regulates commercial and corporate matters. Industrial property legislation also applies to the use of trade marks.

For this issue, the franchise agreement, the franchisee company’s incorporation document and its articles of association should be reviewed together. The formalities for transferring ownership interests depend on the type of company and the applicable provisions.

The franchisor’s approval does not replace those formalities. Conversely, a properly documented corporate transaction may have contractual consequences if it breaches a valid obligation to give notice or obtain prior approval.

Before offering the franchise, instruct a Venezuelan lawyer to establish which changes require notice and which require consent. The agreement should explain the procedure and its effects, without presenting the franchisor’s approval as a public registration process or a general legal requirement.

Control should also be defined precisely. Ownership percentages alone are not enough: voting rights, appointment powers or agreements may influence who directs the company.

3. Design a clear, documented approval procedure

The review should focus on continuity of the franchise model, rather than creating arbitrary obstacles. Define from the outset what information you will need and who will decide on the application.

Supporting documents proportionate to the proposed change may include:

• Details of the new owners and the proposed ownership structure.
• An explanation of who will direct the business and who will manage the outlet.
• Documentation of the funding committed, where the transaction affects the business’s financing.
• A transition plan stating whether managers, systems or key staff will change.

Set a contractual deadline for responding, starting from receipt of the complete application. Explain how requests for clarification will be made and what happens if no response is given; do not leave each party to interpret silence differently.

Decision criteria may include financial capacity, the experience of the new person in charge and potential conflicts involving competing businesses. These criteria should relate to actual obligations under the franchise agreement.

If the franchisee will bear any assessment costs, explain in advance what they cover and how they will be calculated. Without a clear contractual basis, an ownership change should not trigger an unexpected demand for another initial franchise fee.

4. Document continuity after the change

The approval should identify the authorised transaction and any outstanding conditions. It should not be treated as blanket approval for subsequent changes.

Update contact details, representatives and system access permissions. If the person responsible for operations changes, agree on the necessary training before they take up their duties. Review existing guarantees as well: a change in share ownership does not justify assuming that they have ended or that they cover every modification.

Where the same company remains the franchisee, record that continuity. If the agreement is genuinely being transferred, prepare the appropriate document and expressly define each party’s obligations.

Practical application: before signing your first franchise agreement, prepare a simple matrix covering each type of change, the information required, the approval needed and the document that records completion. This will help you manage new owners joining the business without making up the rules as you go.