Franchise Agreement in Brazil: Complete Legal Guide
The franchise system is one of Brazil’s most established business models, generating over R$ 240 billion annually. The relationship between franchisor and franchisee is governed by the Franchise Law (Law 13,966/2019), which establishes transparency, disclosure, and contract formalization requirements.
This guide details the essential legal aspects of franchise agreements in Brazil, from the Franchise Disclosure Document to termination clauses and dispute resolution.
What Is Franchising in Brazil?
Business franchising is the system through which a franchisor grants a franchisee the right to use a trademark or patent, associated with the right to exclusive or semi-exclusive distribution of products or services, in exchange for direct or indirect compensation.
Law 13,966/2019 defines franchising as the system in which the franchisor authorizes the franchisee to use:
- Trademark or sign owned by the franchisor
- Know-how for business implementation and management
- Standardized operating system
- Layout and visual standards for the establishment
- Technical assistance and training
Franchising does not constitute an employment relationship between franchisor and franchisee (art. 1, §1 of Law 13,966/2019).
Franchise Disclosure Document (COF)
The COF (Circular de Oferta de Franquia) is the most important document in the pre-contractual phase. The franchisor must provide the COF to the prospective franchisee at least 10 days before contract signing or payment of any fee.
Mandatory COF Contents
Law 13,966/2019 (art. 2) requires the COF to contain:
- Franchisor’s summary history and corporate form: company data, market experience
- Financial statements: from the last 2 fiscal years
- Pending litigation: lawsuits that could compromise the franchise
- Detailed franchise description: business model, operations
- Ideal franchisee profile: required qualifications
- Franchisee involvement requirements: dedication, participation in operations
- Initial investment specification: fees, costs, working capital
Mandatory Financial Information
| Information | Detail |
|---|---|
| Initial franchise fee | Amount and payment terms |
| Royalties | Percentage, calculation base, frequency |
| Advertising fee | Amount, destination, accountability |
| Estimated total investment | Equipment, inventory, renovations, working capital |
| Return estimate | Payback period, estimated profitability |
Consequences of Non-Compliance
Failure to deliver the COF on time or with incomplete information allows the franchisee to:
- Annul the franchise agreement
- Recover all amounts paid
- Claim damages for losses
Franchise Agreement: Essential Clauses
The franchise agreement must be in writing and govern the entire relationship between parties. Indispensable clauses include:
1. Object and Scope
- Precise description of granted rights
- Authorized products or services
- Transferred know-how
- Operational standards to be followed
2. Territory
Territory defines the franchisee’s exclusive or preferred geographic area:
- Territorial exclusivity: franchisor will not open a new unit in the region
- Territorial preference: franchisee has priority for new units
- Open territory: no geographic exclusivity
- Territorial non-compete clause: franchisor does not directly compete in the region
Clear territory definition prevents conflicts between franchisees and protects the franchisee’s investment.
3. Term and Renewal
- Fixed term (typically 5 to 20 years)
- Conditions for automatic or negotiated renewal
- Deadline for expressing interest in renewal
- Economic conditions for renewal
4. Fees and Compensation
Franchise fee:
- Amount paid for the rights grant
- Generally between R$ 30,000 and R$ 500,000
- Paid upon contract signing
Royalties:
- Percentage of gross revenue (typically 4% to 12%)
- Or fixed monthly amount
- Frequency: monthly, typically
Advertising fee (advertising fund):
- Percentage of revenue (typically 1% to 4%)
- Dedicated to collective network marketing
- Franchisor must account for fund usage
5. Franchisor Obligations
- Grant trademark license
- Transfer know-how and training
- Permanent technical assistance
- Provide operating manuals
- Institutional marketing and advertising
- New product/service development
- Quality supervision and control
6. Franchisee Obligations
- Timely payment of fees and royalties
- Compliance with operational standards
- Business dedication (personally or through qualified agent)
- Maintain commercial premises per visual standards
- Participate in mandatory training
- Purchase products/inputs from approved suppliers
- Provide information and reports to franchisor
7. Non-Compete and Confidentiality
The non-compete clause is essential to protect know-how:
- During the contract: franchisee cannot operate a competing business
- After termination: restriction of 1 to 5 years in a given territory
- Confidentiality: perpetual obligation to maintain secrecy on confidential information
- Limitations: clause must be reasonable in term, territory, and scope (STJ case law)
8. Termination
Causes of termination:
- By expiration: natural end of contract term
- By mutual agreement: both parties agree
- By default: breach of contractual obligations
- For cause: serious fault by one party
- Early termination: upon payment of penalty
Consequences of termination:
- Immediate cessation of trademark use
- Return of manuals and confidential materials
- Removal of visual identity from establishment
- Payment of penalties and outstanding amounts
- Compliance with non-compete clause
INPI Registration
Trademark Registration
Trademark registration at INPI (National Industrial Property Institute) is essential for the franchisor:
- Guarantees exclusive trademark use throughout national territory
- Allows granting use license to franchisee
- Protects against unauthorized use by third parties
- Protection term: 10 years, renewable
Agreement Recording
Recording the franchise agreement at INPI is optional but offers advantages:
- Produces effects against third parties
- Allows tax deductibility of royalties by the franchisee
- Proves the franchise relationship for regulatory purposes
- helps with royalty remittance abroad (international franchises)
The recording process is done electronically through the e-INPI system, with fees of R$ 400 to R$ 1,200.
International Franchises in Brazil
International franchises seeking to operate in Brazil must observe additional requirements:
- Trademark registration at INPI: foreign trademark must be registered in Brazil
- COF adaptation: must comply with Brazilian legislation (Law 13,966/2019)
- Portuguese-language contract: agreement must have a Portuguese version
- Foreign capital registration: investment registered with the Central Bank
- INPI recording: necessary for royalty remittance abroad
- Royalty taxation: 15% withholding tax on overseas remittances, 10% CIDE
Adaptation to the Brazilian market also involves sector-specific regulatory aspects (ANVISA for food, CRO for dentistry, etc.). Learn more about our immigration and visa services.
Dispute Resolution in Franchises
The franchise agreement should provide for dispute resolution mechanisms:
Mediation
- Mandatory preliminary step in many contracts
- Seeks consensual solution between parties
- Lower cost and shorter timeline than arbitration or courts
Arbitration
- Technical and specialized solution
- Arbitral award has the force of a judicial enforcement title
- Confidential proceedings
- Higher cost than mediation
Regular Courts
- Forum defined in the contract (usually the franchisor’s domicile)
- Application of the Civil Code and franchise legislation
- Consumer Protection Code generally does not apply to franchisor-franchisee relationships (prevailing STJ jurisprudence)
Trends and Considerations for 2026
The Brazilian franchise market presents relevant trends:
- Digital franchises: home-based and e-commerce models
- Micro-franchises: initial investment under R$ 105,000
- ESG and compliance: increasing demand for governance programs
- LGPD: mandatory customer and employee data compliance
For specific questions about franchise agreements, consult our specialists in business law.
Conclusion
The franchise agreement in Brazil is a complex instrument requiring rigorous attention to the legal requirements of Law 13,966/2019. The COF is the transparency foundation of the relationship, while the contract must balance franchisor and franchisee interests with clear and equitable clauses.
Specialized legal counsel in business law is essential for both franchisors and franchisees, ensuring legal compliance and investment protection for both parties.
This article is for informational purposes only and does not constitute legal advice. Each case has specific circumstances that should be analyzed by a qualified attorney.
