Leasing Premises When Franchising in Venezuela

A business may perform well at its current premises yet encounter difficulties when trying to replicate its model in rented properties. Before franchising in Venezuela, establish guidelines for aligning the lease with the franchise agreement. This is not simply about choosing a good location: the aim is to ensure that the franchisee can set up, operate and vacate the premises on clearly understood terms, without assuming that the franchisor has rights the landlord has never agreed to.

1. Define who takes the lease and who assumes the obligations

The first decision is to identify the tenant. This may be the franchisee, contracting directly with the landlord, or the franchisor, which then permits occupation through a legally valid arrangement. Each option allocates payments, guarantees and risks differently.

Approving premises does not make the franchisor the tenant or a guarantor. This distinction must be clear in the documents and in communications with the landlord. If the franchisor signs up to any additional obligation, it must understand its scope before committing.

Where subletting, assignment or any other arrangement allowing another party to occupy the premises is contemplated, a lawyer should check its legal viability and the permissions required. The franchise agreement alone does not confer rights over someone else’s property.

Prepare a fact sheet for each prospective outlet covering:

• The landlord and the person authorised to enter into the lease.
• The company that will be the tenant and operate the business.
• Who is responsible for rent, utilities, repairs and guarantees.
• The permissions needed for building works, signage and occupation.
• Documents establishing the right to use the property.

This fact sheet helps prevent the franchise network from growing on the basis of verbal agreements that are difficult to prove.

2. Align the timelines before investing

The franchise agreement and the lease serve different purposes, but their timelines need to work together. A franchisee could retain the right to use the brand while losing its operating premises earlier than expected. Equally, it could remain liable for rent after its franchise has ended.

Compare the dates for handing over the premises, fitting out, starting rent payments, opening, expiry and applying for renewal. Do not present a future renewal as guaranteed if it depends on a further agreement or conditions that have not yet been met.

Before authorising significant expenditure, review three scenarios: a delay in handing over the premises, an inability to carry out the fit-out, and termination of the franchise relationship. For each, identify which contract addresses the situation and who would bear the cost.

Any negotiated fit-out periods or conditions that must be met before proceeding should be documented and legally reviewed. Franchise approval is no substitute for an enforceable right to occupy and adapt the premises.

3. Document the fit-out and removal of branding

A consistent brand identity may require electrical installations, ventilation, fixed furniture or alterations to the façade. Before including these in the budget, distinguish between permitted works and those requiring express authorisation from the landlord or the relevant authorities.

Record the property’s initial condition through an inventory and photographs agreed by the parties. Then document the authorised works and retain the supporting records.

The file should clarify:

• Which items belong to the landlord and which to the operator.
• Who pays for the fit-out and associated repairs.
• Which fixtures and installations will remain when the lease ends.
• What must be removed and who will reinstate the affected areas.

Also make arrangements for removing branding when the franchise ends. Requiring the franchisee to do so is not enough if access to the premises could, in practice, be blocked. Any provision for the franchisor to gain access must be based on valid consent and legal advice; a right to enter or remove property unilaterally must never be assumed.

4. Review Venezuela’s legal framework and prepare a comparison sheet

Venezuela has no comprehensive franchise law. This does not mean that franchise relationships are unregulated: the Civil Code, Commercial Code and other general legislation apply as appropriate. A Franchise Registration Service was also announced in 2023; its procedures should be checked with the competent authority.

For commercial premises, the Decree with the Rank, Status and Force of Law Regulating Property Leases for Commercial Use is particularly relevant. Its applicability and mandatory provisions should be reviewed before agreeing financial terms, guarantees, duration or termination arrangements. Freedom of contract does not allow parties to disregard these rules.

Documentary evidence of the right to use the premises may also be required for municipal applications. The specific requirements depend on the relevant municipal ordinance and procedure.

Practical action: before committing to a new outlet, compare both contracts on a single sheet covering occupation, timelines, works, payments and exit arrangements. Resolve any inconsistencies before investing.