Portugal Could Save Franchisors Millions

By Sean Goldsmith

Portugal could give franchisors something more valuable than size: the chance to find expensive mistakes early.

Franchise brands dream about cracking Europe's biggest markets. Starting somewhere smaller could be the smarter move.

When a franchise boss starts talking about Europe, you can almost predict which countries will appear on the boardroom map. Britain, Germany, France and Spain offer millions of customers, hundreds of potential locations and the sort of growth numbers that make an international expansion plan look exciting. There is only one snag: if the franchise isn't ready to travel, those big markets also give it plenty of opportunities to burn through money.

That is what makes Portugal surprisingly interesting. With a population of roughly 10 million, it will never offer the same potential unit count as Europe's largest economies, but that may be precisely the point. For a brand making its first serious move overseas, Portugal could offer something more valuable than size: somewhere to discover what is wrong with the international model before those mistakes become painfully expensive. Perhaps franchisors have been choosing their first overseas markets backwards.

Big Markets Come With Big Mistakes

International expansion looks wonderful in a press release. A new country is announced, a development agreement is signed and management starts talking about dozens or even hundreds of future locations. The excitement tends to arrive long before somebody has to make the numbers work.

That is when prices that looked perfectly reasonable at home can suddenly become difficult to sustain. Ingredients or equipment cost more than expected, the property model changes, labour squeezes margins and training needs rewriting. The local franchise partner may also need far more help from head office than anyone allowed for in the original budget.

None of these problems is particularly unusual when a business crosses a border. The expensive mistake is discovering all of them at scale. Portugal gives a franchisor the opportunity to find some of those problems in a more contained market, where changes can potentially be made before the same weaknesses are repeated across a much larger network.

The point is not to treat Portuguese consumers as guinea pigs. It is to treat the franchisor's own assumptions with considerably more suspicion.

Subway Is Making a Serious Bet

There are already signs that major international operators see opportunity in Portugal. Subway expanded its relationship with Grupo Vierci in 2025 to cover Spain and Portugal, with plans that included approximately 50 additional restaurants in Portugal over ten years. It is an interesting commitment because it represents meaningful expansion without assuming that every international market needs hundreds of outlets immediately.

Portugal is producing concepts of its own too. NATA Lisboa has taken one of the country's most recognisable products, the pastel de nata, and used franchising to carry the concept into international markets. That movement in both directions matters because Portugal is not simply receiving foreign franchise brands. It is building businesses that are learning how to travel beyond their home market as well.

Stop Calling Portugal Cheap

There is another assumption worth challenging. Portugal should not be chosen simply because somebody sitting in a boardroom thinks it is the cheap end of Western Europe. The national minimum wage reached €920 a month in 2026, while commercial property in Lisbon and other popular locations can quickly challenge the idea that Portugal offers bargain basement European expansion.

Franchisors building their plans around cheap labour and cheap property could therefore get an unpleasant surprise, but that may actually make Portugal a more useful test. A concept that can produce sensible franchisee economics using real Portuguese wages, rents, supply costs and selling prices has proved something important about the strength of its model.

The opposite is equally revealing. If the business only survives because head office keeps making exceptions, subsidising costs or changing the operating system, management has learned something it needs to know before going any further. The franchise may simply not be ready to travel.

Discovering that across a small number of locations will hurt. Discovering it after committing to hundreds could threaten the entire international strategy.

Perhaps Expansion Needs Less Ego

There is status attached to announcing France, Germany, Britain or Spain. There is considerably less excitement in telling investors that the company deliberately selected a smaller market because management wanted to expose the flaws in its own franchise system before making a much larger commitment.

Yet the second decision may demonstrate considerably better leadership. International expansion should not become an exercise in collecting flags for the corporate website. The real test is whether franchisee economics, supply chains, training, technology and support can survive outside the conditions in which the original business was built.

Portugal will not be the right answer for every franchise, and nor should it be. The lesson is that the biggest available market and the smartest first market can be two entirely different things. Franchisors that understand the difference could save themselves an enormous amount of money.

What Franchisors Should Do Next

Before signing another international development agreement, put the headline unit target to one side and build the first ten locations on paper using real local numbers. Include actual wages, realistic rents, supply costs, local selling prices and the additional support the franchisee will need from head office. If the economics only work after making generous assumptions or repeated exceptions, finding a more enthusiastic master franchisee will not solve the problem. The model needs fixing before it travels.

The Bigger Question

Franchising has spent years treating international expansion as proof of ambition, but perhaps ambition sometimes gets in the way of good judgement. A CEO who deliberately chooses a smaller first market may attract fewer headlines than one announcing hundreds of overseas locations, yet they could be taking considerably less risk with franchisees' money and the reputation of the brand. Portugal therefore raises an uncomfortable question for the industry: how many international expansion failures started because somebody wanted the impressive announcement before they had proved the economics?

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