The COF (“Circular de Oferta de Franquia”, or “Franchise Disclosure Circular”) is the document that, by law, sets out what the franchisor must disclose before selling a franchise — and what’s missing from it can cost the future franchisee dearly.
1. The COF that didn’t tell the whole story
Illustrative case: the situation below is fictional and intended solely for educational purposes. Any resemblance to real cases is coincidental.
A business owner in the food service sector invested R$280,000 in a fast-casual dining franchise with locations across four states. The process involved meetings, visits to model stores, and PowerPoint presentations. The COF was delivered ten days before the contract was signed — within the legal deadline.
Six months after opening, the franchisee began receiving charges for site adaptation that hadn’t been included in the initial figures — layout renovations, equipment replacement, and franchisor approval fees totaling R$40,000. When researching the franchisor’s track record, he discovered three pending lawsuits filed by former franchisees, none of which had been mentioned in the COF.
The COF had been delivered on time. But it was incomplete — and the contract had already been signed.
This kind of situation is more common than it seems. Law 13,966/2019 (the Brazilian Franchise Law) establishes what must be included in the COF, but it doesn’t create an automatic audit mechanism. The duty to verify what’s written — and what’s missing — falls on the prospective franchisee, ideally with legal support before signing.
2. What the COF is and its legal role
The COF (“Circular de Oferta de Franquia”) is the mandatory disclosure document that the franchisor must deliver to the prospective franchisee before any contract is signed or any payment of any kind is made. This obligation is set out in Article 2 of Law 13,966/2019.
The legal role of the COF is informational, not a guarantee. It does not guarantee that the franchise will perform as described — that would amount to a promise of results, which is prohibited both by contractual ethics and by Article 4, § 2 of the law itself. What it does is level out the information asymmetry between the franchisor (who knows the operation in depth) and the franchisee (who is evaluating it from the outside).
For this reason, the COF is the starting point of due diligence, not the finish line. A candidate who reads the COF and signs the contract without verifying what it states — and what it omits — takes on a risk that could have been reduced.
An important technical point: the COF is not the franchise agreement itself. These are separate documents. The agreement governs the relationship after signing; the COF governs what must be disclosed beforehand.
3. The 11 mandatory items in the COF — what each one reveals
Article 2 of Law 13,966/2019 lists the items that every COF must contain. Below is what each one tells the franchisee:
| Item | What it must include | What it reveals to the franchisee |
|---|---|---|
| 1. Franchisor’s background | Legal form, date of incorporation, financial statements for the last 2 years | Financial health and stability of the franchisor |
| 2. Pending litigation | Ongoing lawsuits involving franchisees, suppliers, and consumers | Systemic conflicts within the network or with third parties |
| 3. Business description | What the franchisee will do, products/services, territory | Clarity on the scope of the franchise |
| 4. Franchisee profile | Required background, experience, and skills | Whether the candidate is a fit for the operation |
| 5. Site requirements | Location, minimum area, renovation requirements | Real cost of site adaptation (often underestimated) |
| 6. Status of existing franchisees | List with names and contact details of active franchisees and those who left in the past 12 months | Allows direct conversations with people already in the network |
| 7. Estimated initial investment | Franchise fee, working capital, initial inventory, construction work, equipment | The total cost of entry — not just the franchise fee |
| 8. Financial information | Royalty rate (fixed amount or percentage), advertising fee, other fees | Structure of recurring costs after opening |
| 9. Franchisor’s role | Initial training, ongoing support, supply chain, technology | What the franchisor delivers in return |
| 10. Agreement and amendments | Copy or draft of the franchise agreement | The legal relationship the franchisee is about to enter into |
| 11. Trademark registration status | Registration with the INPI (Brazil’s National Institute of Industrial Property) | Whether the brand actually exists as a protected asset |
Item 6 deserves special attention: the list of former franchisees who left in the past 12 months is one of the most valuable due diligence tools available. Franchisors who make it difficult to contact this list — or whose lists show high turnover — are sending a relevant signal.
4. The 10-day deadline: why it exists and what happens if it’s violated
Article 3 of Law 13,966/2019 requires that the COF be delivered to the prospective franchisee at least 10 (ten) days before any signature or payment.
The deadline exists because the COF is long — often 40 to 80 pages, with draft contracts attached. Lawmakers recognized that candidates need time to read it, compare it with other networks, consult a lawyer, and make an informed decision.
What happens if the deadline is violated:
- The candidate may claim that the franchise agreement is void, based on Article 7 of Law 13,966/2019, which allows the franchisee to seek annulment and the return of all amounts paid.
- Violating the deadline does not automatically invalidate the contract — it requires legal action and a case-by-case analysis. But it provides solid grounds for a legal claim, especially if the franchisee can show that the rushed timeline prevented proper review.
Practical point: a franchisor that delivers the COF within the correct timeframe, but with an incomplete document or false information, may still be held civilly liable even without violating the 10-day deadline. The deadline is necessary, but not sufficient.
5. What to verify beyond what’s written in the COF
The COF discloses what the franchisor chose to disclose. Due diligence verifies whether what’s stated is true and whether there’s relevant information that isn’t there.
Recommended practical checks before signing:
- INPI search: verify whether the trademark is actually registered, whether there are any pending oppositions, and who holds ownership. A COF describing the brand as “in the process of registration” implies real risk.
- Litigation search: research the franchisor’s history (and that of its partners) through the public search systems of state courts, the Federal Regional Courts (TRF), and the Superior Court of Justice (STJ). Lawsuits filed by former franchisees reveal patterns in the franchisor’s behavior.
- Contact with former franchisees: the list required under item 6 of the COF is the starting point. Ask about actual support received, the gap between projections and operating results, and reasons for leaving.
- Visits to operating units: without franchisor representatives present. Observe foot traffic, staff, and daily operations.
- Territory analysis: check whether there’s real territorial protection or whether the contract allows the franchisor to open digital channels and other units nearby.
- Contract review by a lawyer: the franchise agreement is long, technical, and almost always drafted by the franchisor. A lawyer experienced in franchising can identify unbalanced clauses — unilateral termination rights, asymmetric penalties, restrictions on reselling the unit — that don’t stand out in the sales pitch.
6. Red flags: what in the COF should trigger the prospective franchisee’s alert
Not every irregularity in the COF is a reason to walk away. Some are fixable; others are structural. The signs below deserve closer scrutiny before making a decision:
Warning signs:
- Pending litigation without adequate description: the law requires a description. “Ongoing lawsuits” with no estimated value or stated nature is partial non-compliance.
- Absent or vague site adaptation costs: if the COF says “to be determined based on the site,” the actual investment may be substantially higher than projected.
- Trademark without consolidated registration at the INPI: the franchise is being sold without its main asset properly protected.
- Incomplete list of former franchisees or refusal to provide contact details: the law requires the list to include contact information. Resistance here is a signal.
- Financial statements not provided or containing auditor qualifications: the franchisor’s financial health is a precondition for the promised support.
- Variable royalty rate with no defined criteria: volatility in recurring costs without a clear contractual parameter is a permanent financial risk.
- Prohibition on selling the unit or very restrictive transfer conditions: the franchisee may need to exit the network — the contract needs to provide for reasonable terms.
- No exclusive territory or exclusivity limited to physical channels: the franchisor’s own e-commerce expansion may compete with the franchisee’s physical unit.
7. Frequently asked questions
Does the COF guarantee that the franchise will perform as promised?
No. The COF is a disclosure document — it formalizes what the franchisor states about the network and the business conditions. It is not a guarantee of financial performance, and the law expressly prohibits any promise of results in a franchise relationship (Article 4, § 2 of Law 13,966/2019). What the COF does is reduce the information asymmetry between the party that knows the operation (the franchisor) and the party evaluating it from the outside (the candidate). The investment decision remains the candidate’s own, and it should be based on a careful reading of the COF, due diligence on what is disclosed, and legal review of the contract. Franchisors who use the COF to present idealized financial projections — even if formally within what the law permits — are shifting the risk of unverified expectations onto the candidate.
This is general information and does not replace consultation with a lawyer for analysis of your specific case.
What happens if I sign the contract and later find out the COF contained false information?
The contract may be annulled based on a defect in consent (Article 138 et seq. of the Civil Code — Law 10,406/2002) or on non-compliance with the disclosure obligations of Law 13,966/2019. The burden of proving the false information falls on the franchisee — which reinforces the importance of documenting everything before signing: keeping emails, presentations, versions of the COF received, and any communication from the franchisor regarding costs and projections. False information in pre-contractual documents may also constitute misleading advertising (Article 37 of Law 8,078/1990 — the Consumer Protection Code), depending on the nature of the case and the franchisee’s profile. Determining the most appropriate course of action — termination, annulment, damages — depends on the specific circumstances of each situation and requires individualized legal assessment.
This is general information and does not replace consultation with a lawyer for analysis of your specific case.
Can I negotiate the franchise agreement before signing?
Yes, it’s possible. The franchise agreement is not necessarily an immutable adhesion contract, although in practice many franchisors resist substantial changes — especially in larger networks, where contractual standardization is part of the business model. Room for negotiation exists mainly around clauses covering: term and renewal, termination criteria and associated penalties, conditions for transferring the unit, territorial exclusivity, and renovation obligations throughout the contract term. Negotiation is most effective when conducted before signing, with clarity about which points are priorities, and when the candidate is represented by a lawyer familiar with industry standards. Proposals to amend terms after signing carry less legal weight and are less likely to be accepted in practice.
This is general information and does not replace consultation with a lawyer for analysis of your specific case.
Conclusion
The COF is the most important tool available to a prospective franchisee before making an investment decision. Using it well means reading it in full, verifying what is disclosed, and identifying what’s missing — before the 10 days run out and the contract is signed.
The legal deadline exists to protect the buying party. Making the most of it with qualified legal support is the most effective way to reduce the risk of a decision that often involves the accumulated savings of years of work.
The information in this article is general and educational in nature. It does not constitute legal advice for any specific situation and does not replace a lawyer’s analysis of your particular case.
Alessandra De Paula Souza — OAB/PR 31.133 Business Law | Franchising and Contracts