Franchising Into Brazil: The Disclosure Document Foreign Franchisors Must Give (Lei 13.966/2019)

Franchising is one of the most common ways a foreign brand enters Brazil — food, fitness, retail, education and services all scale here through local franchisees. The rules are set by Lei 13.966/2019, the Franchise Law that has governed business-format franchising since roughly March 2020. Above everything else, that law requires one document: the Circular de Oferta de Franquia (COF), a franchise disclosure document you must hand a prospective franchisee at least ten days before they sign anything or pay anything. Get that timing or that content wrong and the franchisee can unwind the deal.

This briefing explains what the Franchise Law requires of a foreign franchisor: the COF and its ten-day rule, what the document must disclose, the confirmation that a franchise is not an employment relationship, and the cross-border points — governing law, and recording your trademark and franchise agreements at INPI — that make an international franchise into Brazil work. It is written for the brand deciding how to expand into Brazil and wanting to know the legal spine of doing it by franchise.

The law: Lei 13.966/2019 replaced the 1994 regime

Lei 13.966/2019 — commonly called the new Franchise Law — came into force around March 2020 and replaced the older Lei 8.955/1994. It governs business-format franchising in Brazil: the model where a franchisor licenses its brand, system and know-how to a franchisee who runs an outlet under that system. If you are expanding a branded business through independent local operators, this is the statute that frames the relationship.

The new law kept the core architecture of the old one — disclosure before signing is still the heart of it — while modernizing the detail and widening what the disclosure document must contain. For a foreign franchisor, the practical message is that Brazil has a specific, codified franchise regime, and compliance with it is not optional dressing on an international template; it is the condition of a franchise that will hold up.

The core duty: the COF, ten days before signing

The central obligation is precise and unforgiving. The franchisor must give a prospective franchisee the Circular de Oferta de Franquia (COF) — the franchise disclosure document — at least ten days before the franchisee signs any binding agreement (including a preliminary one) or pays any fee. The ten-day window is a cooling-off period by design: it exists so the candidate can read, take advice, and decide with the full picture in hand.

The sanction for getting it wrong is what gives the rule its teeth. If the franchisor fails to deliver the COF as required — not at all, too late, or materially deficient — the franchisee may void the contract and recover the amounts already paid, with monetary correction. In other words, a franchisor who rushes a candidate to signature, or hands over a thin or late disclosure, can find the whole arrangement unwound and the money returned. The document and its timing are not paperwork to be back-dated; they are the foundation the contract stands on.

Hand over a complete COF and wait the ten days — or risk a franchisee who can later undo the deal and take the money back.

What the COF must disclose

The Franchise Law is specific about the content of the COF. It must set out, among other things:

• The franchisor's business history and financial situation;
• Any litigation involving the franchisor or its controllers that could compromise the franchise system;
• A full description of the fees — the franchise fee and any recurring payments;
• The franchisee's total estimated investment to open and start operating;
• The obligations of both parties, franchisor and franchisee;
• Territory and exclusivity — whether the franchisee gets a protected area;
• The intellectual property involved, above all the trademarks (which the franchisor must actually own in Brazil — see our briefing on trademarks and the Madrid Protocol);
• The training and support the franchisor will provide;
• The rules on renewal, termination and non-competition.

Read together, these requirements force the franchisor to put the real economics and the real risks of the system in front of the candidate before money changes hands. For a foreign franchisor, the two items that most often need work are the litigation disclosure (which reaches the controllers, not just the operating company) and the IP section — because a franchise built on a brand the franchisor has not registered in Brazil is built on sand.

What else the 2019 law settled

Beyond disclosure, Lei 13.966/2019 clarified several points that matter to how a franchise is structured.

It expressly allows franchising by public entities, widening who may act as franchisor. It addresses sublease above cost — the common arrangement where a franchisor leases premises and subleases to the franchisee — giving it a clearer footing. And, importantly for risk, it confirms that a franchise relationship is not employment: when the arrangement is properly structured, there is no labour bond between the franchisor and the franchisee or the franchisee's staff.

That last point is worth dwelling on, because misclassification is a live risk in Brazil's franchisee-heavy sectors. The statutory confirmation is protective, but it is conditional on the relationship genuinely being a franchise rather than a disguised employment or management arrangement. Structure and conduct have to match the label. A franchisor that exercises the day-to-day control of an employer over a franchisee's workers — dictating hours, discipline and pay as if they were its own staff — invites a Brazilian labour court to look past the franchise form. The protection the law offers is real, but it rewards a franchise that is run as one.

The distinction between the old and new regimes is easy to lose sight of, so it helps to be concrete about what carried over and what is new. The disclosure-before-signing architecture is the through-line from Lei 8.955/1994; what Lei 13.966/2019 added was a wider and more detailed list of what the COF must contain, the explicit treatment of public-entity franchising and sublease, and the clarified non-employment position. For a foreign franchisor coming to the market fresh, none of this is legacy baggage — it is simply the current statute, and it should be read as it stands rather than through the lens of an older international summary.

Fees, royalties and getting money out of Brazil

A franchise only works for a foreign franchisor if the fees and royalties can actually leave Brazil, and that is a legal question as much as a commercial one. The COF must already describe the full fee structure — the initial franchise fee and any recurring payments — so the franchisee sees the real cost before signing. But disclosure is only half the picture; the other half is structuring those flows so they are deductible for the payer and remittable abroad for the franchisor.

This is where recording the agreements at INPI becomes central rather than optional. Registering the trademark licence, the franchise agreement and any technology-transfer component with INPI is part of what enables the payments to be treated as deductible and to be remitted through the official foreign-exchange system. Get the recording right and the royalties flow home cleanly; skip it and the franchisor can find its economic return stranded inside Brazil despite a franchise that operates perfectly well on the ground. The commercial model and the legal recording have to be designed together, not in sequence.

A franchise that runs beautifully in Brazil is worth little to a foreign owner whose royalties cannot lawfully leave it.

Cross-border: governing law, and recording at INPI

An international franchise raises two questions a purely domestic one does not. First, which law governs. Brazilian law allows the parties to an international franchise agreement to choose the governing law, but that choice must respect Brazilian public order — mandatory Brazilian rules, the disclosure regime among them, cannot be contracted away simply by choosing foreign law for a franchise operating in Brazil. A foreign franchisor should not assume its home-country template overrides the Franchise Law on Brazilian soil.

Second, recording the agreements at INPI. Registering the trademark licence, franchise, and technology-transfer agreements with INPI helps make them enforceable against third parties and enables both the deductibility of the payments and the lawful remittance of royalties abroad through the foreign-exchange system. For a franchisor whose whole return depends on getting fees and royalties out of Brazil, this recording step is not administrative housekeeping — it is how the money flows home legitimately.

Structuring the entry: master franchise or direct

Foreign franchisors typically choose between two structures. A master franchise grants a local master franchisee the right to develop the brand across Brazil (or a region) and to sub-franchise — useful when you want local scale and local knowledge without running every outlet yourself. A direct model has the franchisor contracting with individual franchisees itself, keeping control but demanding more local presence and administration. The choice shapes the COF, the fee flows, and the tax and FX planning around royalties.

Whichever you pick, the practical build is the same short list done in order: register the trademark first; localize and translate the COF so it is genuinely usable by a Brazilian candidate and compliant with the law; structure the fees and royalties for tax and foreign-exchange efficiency; and record the agreements at INPI. For franchisors also standing up a Brazilian entity, this sits alongside the company formation process and the wider Brazil business law work.

How Brazil Legal Shield can help

We help foreign franchisors enter Brazil correctly: drafting and localizing the COF to Lei 13.966/2019, structuring master-franchise and direct arrangements, ensuring the ten-day disclosure and content rules are met so the contract holds, registering the trademark that the franchise depends on, and recording the franchise, licence and technology-transfer agreements at INPI so royalties can be remitted abroad lawfully. We coordinate the corporate, tax and IP pieces together, work in English, and quote in writing. To plan a franchise entry into Brazil, explore our intellectual property services or get in touch.