Brazil is the fourth-largest franchise market in the world, with over 3,000 franchise brands and more than 184,000 franchise units generating approximately R$240 billion (roughly $48 billion USD) in annual revenue. For any franchisor considering international expansion into Latin America, Brazil is not just an attractive market. It is a regulated market that requires careful legal planning. At Lopes Law LLC, we guide both US franchisors and Brazilian investors through the requirements of Lei de Franquias (Law 13.966/2019), the statute that governs every franchise relationship in Brazil.

This guide provides a comprehensive analysis of Brazil’s franchise law, explains how it differs from the US FTC Franchise Rule, and walks through the disclosure, registration, and compliance requirements that franchisors must satisfy before offering or selling a franchise in Brazil.

What Is Lei de Franquias (Law 13.966/2019) and When Did It Take Effect?

Lei de Franquias, formally known as Law 13.966 of December 26, 2019, is Brazil’s current franchise law. It replaced the prior franchise statute (Law 8.955/1994) and took effect on March 26, 2020. The law defines what constitutes a franchise in Brazil, establishes mandatory pre-contractual disclosure requirements, and sets rules governing the franchise relationship.

Under Article 1 of the law, a franchise (franquia empresarial) is defined as a system in which a franchisor grants a franchisee the right to use trademarks, patents, trade secrets, and operating methods in exchange for direct or indirect compensation. This definition is broad enough to capture virtually any licensing arrangement that involves brand usage, operational standards, and ongoing fees.

The 2019 law introduced several important changes from its predecessor. It clarified that subfranchising relationships (where a master franchisee grants subfranchises) are subject to the same disclosure rules. It expanded the list of mandatory disclosure items. And it provided greater clarity on the legal consequences of inadequate disclosure.

What Must a Franchisor Disclose Under Brazil’s Franchise Law?

Article 2 of Law 13.966/2019 requires every franchisor to provide a Circular de Oferta de Franquia (COF), which is Brazil’s equivalent of the US Franchise Disclosure Document (FDD). The COF must be delivered to the prospective franchisee at least 10 days before the execution of the franchise agreement or the payment of any fees.

The COF must include the following categories of information:

• Corporate history: The franchisor’s full corporate name, trade name, address, corporate structure, and a description of its business activities
• Financial statements: Audited balance sheets and income statements for the two most recent fiscal years
• Litigation history: Pending lawsuits that may affect the franchise system, particularly those related to the franchise relationship or the franchisor’s trademarks
• Intellectual property: A description of all trademarks, patents, and copyrights licensed to the franchisee, including their registration status with INPI (Brazil’s National Institute of Industrial Property)
• Territory: Whether the franchise grant includes territorial exclusivity and the criteria used to define territories
• Fees and costs: The initial franchise fee, ongoing royalties, advertising contributions, and any other fees or financial obligations
• Estimated initial investment: A detailed breakdown of all costs required to establish the franchise operation, including real estate, equipment, inventory, and working capital
• Training: The training program provided by the franchisor, including duration, location, and any costs borne by the franchisee
• Obligations of both parties: A complete description of the mutual obligations of the franchisor and franchisee during the term of the agreement
• Termination provisions: The conditions under which the franchise agreement may be terminated by either party, including notice periods and post-termination obligations
• Financial performance: If provided, any representations regarding the financial performance of existing franchise units (similar to FDD Item 19 in the US)
• Franchisee list: Contact information for current and former franchisees

The level of detail required in the COF is comparable to the US FDD, although the specific disclosure categories and formatting conventions differ. At Lopes Law LLC, we prepare COFs for US franchisors expanding into Brazil and review COFs for investors acquiring Brazilian franchise rights.

How Does Brazil’s Franchise Law Differ from the US FTC Franchise Rule?

While both the US FTC Franchise Rule (16 C.F.R. Part 436) and Brazil’s Law 13.966/2019 require pre-sale disclosure, there are significant structural differences that franchisors must understand before entering the Brazilian market.

One critical difference is that Brazil does not require government registration of the COF before offering franchises. Unlike US states such as California, New York, and Illinois that require franchisors to file and register their FDD with a state authority before selling, Brazilian law requires only that the COF be delivered to the prospective franchisee within the 10-day window. This makes the compliance process somewhat simpler administratively, but it does not reduce the franchisor’s obligation to provide accurate and complete disclosure.

What Happens if a Franchisor Fails to Deliver the COF?

Article 3 of Law 13.966/2019 specifies the consequences of failing to deliver the COF in accordance with the law. If the franchisor does not provide the COF at least 10 days before the franchisee signs the agreement or pays any fee, the franchisee may seek annulment (anulacao) of the franchise contract.

If the contract is annulled, the franchisor must return all amounts paid by the franchisee, including the franchise fee, any royalties paid, and any other payments made under the agreement. The franchisor may also be liable for damages caused by the non-disclosure.

Brazilian courts have enforced this provision strictly. In several notable decisions, courts have annulled franchise agreements where the franchisor failed to deliver the COF within the required timeframe, even when the franchisee had been operating the franchise for years before bringing the claim. This makes timely COF delivery not just a best practice but a critical legal requirement.

What Are the Trademark Requirements for Franchising in Brazil?

Article 2, item VI of Law 13.966/2019 requires the COF to include information about all trademarks licensed to the franchisee, including their registration status with INPI (Instituto Nacional da Propriedade Industrial). While the law does not explicitly prohibit franchising with an unregistered trademark, operating a franchise system in Brazil without INPI registration creates significant legal risk.

Under Brazilian trademark law (Law 9.279/1996, the Industrial Property Law), trademark rights in Brazil are acquired through registration, not through use. This is a “first to file” system, in contrast to the US where common law trademark rights can be established through use in commerce. A US franchisor that fails to register its trademark with INPI before entering the Brazilian market risks having the mark registered by a third party, which could block the franchisor from using its own brand name in Brazil.

At Lopes Law LLC, we coordinate INPI trademark filings for US franchisors as part of our international franchise launch service. The INPI registration process typically takes 12 to 24 months, so early filing is essential. For more on trademark protection in international franchise systems, see our guide on international franchise investment.

How Should the Franchise Agreement Be Structured Under Brazilian Law?

The franchise agreement (contrato de franquia) under Brazilian law must be in writing and in Portuguese. While the COF can reference documents in other languages, the operative franchise agreement must be executed in Portuguese. For US franchisors, this means that the English-language franchise agreement used domestically cannot simply be translated and used in Brazil. The agreement must be adapted to comply with Brazilian contract law, consumer protection regulations, and the specific requirements of Law 13.966/2019.

Key provisions that require careful drafting under Brazilian law include:

• Governing law and dispute resolution: Brazilian courts generally enforce choice-of-law and arbitration clauses, but there are limitations. Consumer protection laws (Codigo de Defesa do Consumidor) may apply to individual franchisees, potentially overriding contractual choice-of-law provisions. At Lopes Law LLC, we typically recommend arbitration under the rules of the CAM-CCBC (Center for Arbitration and Mediation of the Brazil-Canada Chamber of Commerce) or the ICC for international franchise disputes.
• Non-compete clauses: Post-termination non-compete provisions are enforceable in Brazil, but they must be reasonable in scope, duration, and geographic area. Courts have struck down non-competes that are excessively broad.
• Royalty remittance: Franchise agreements involving royalty payments from a Brazilian franchisee to a US franchisor must comply with Central Bank of Brazil (BACEN) regulations governing foreign exchange and cross-border payments. The franchise agreement must be registered with INPI to enable royalty remittance, and withholding taxes (currently 15% on royalty payments to non-residents) apply. For more on cross-border considerations, see our Latin America franchise expansion guide.
• Data protection: Brazil’s LGPD (Lei Geral de Protecao de Dados, Law 13.709/2018) applies to all personal data processing within Brazil. Franchise agreements must address data protection obligations, including the roles of controller and processor, data transfer mechanisms, and compliance responsibilities.

What Tax Considerations Apply to Franchise Operations in Brazil?

Franchise operations in Brazil are subject to multiple layers of taxation that affect both the franchisee’s operations and the franchisor’s revenue from royalties and fees. Understanding these tax obligations is essential for accurate financial modeling.

• ISS (Imposto sobre Servicos): Municipal service tax applies to franchise fees and royalties. Rates vary by municipality but typically range from 2% to 5%.
• PIS and COFINS: Federal social contributions apply to gross revenue. Combined rates are approximately 3.65% under the cumulative regime or 9.25% under the non-cumulative regime.
• IRPJ and CSLL: Corporate income tax and social contribution on net income. The combined rate is approximately 34% on taxable income.
• Withholding tax on royalties: When a Brazilian franchisee remits royalties to a US franchisor, Brazil imposes a 15% withholding tax (reduced from the standard 25% rate under the Brazil-US tax treaty, if applicable).
• CIDE: An additional 10% tax (Contribuicao de Intervencao no Dominio Economico) may apply to royalty payments for technology transfer, though its application to franchise royalties is subject to interpretation.

At Lopes Law LLC, we work with Brazilian tax advisors to structure franchise agreements that minimize double taxation and comply with both US and Brazilian tax requirements. Our trilingual team (English, Spanish, Portuguese) ensures nothing is lost in translation during these complex cross-border transactions.

Related Resources from Lopes Law LLC

• International Franchise Investment Guide
• Latin America Franchise Expansion
• Brazil Business Legal Guide
• Master Franchise Agreements
• Franchise Agreement Red Flags
• Franchise Exit Audit

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Last updated: March 12, 2026

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