In the Mexican legal framework, franchises are regulated under the Industrial Property Law, which sets forth various provisions to ensure a secure legal environment for both the franchisor and the franchisee. Below are the most relevant points:
Definition of a Franchise
The law defines a franchise as a relationship where, alongside the trademark license, technical knowledge or assistance is transferred to the franchisee. This enables the franchisee to produce or sell goods or provide services in a uniform manner, following the operational, commercial, and administrative methods established by the franchisor. This guarantees the quality, prestige, and image of the products or services.
Franchise Agreement Requirements
The franchise agreement must be in writing and must include, at a minimum, the following elements:
The geographic area where the franchisee will operate.
The location and characteristics of infrastructure investments.
Inventory, marketing, and advertising policies.
Policies and procedures related to refunds, financing, and other compensation.
Criteria and methods for determining profit margins and/or commissions.
Characteristics of technical and operational staff training.
Criteria and methods for supervising and evaluating performance.
Terms and conditions for sub-franchising, if applicable.
Grounds for termination of the contract.
Provisions for the review and modification of the contract.
Pre-Contractual Information
The franchisor must provide the potential franchisee with detailed information about the state of the business at least 30 days before signing the agreement. Any false information could lead to the nullification of the contract and legal claims for damages.
Confidentiality and Termination of the Contract
The franchisee is obligated to maintain confidentiality regarding the franchisor’s information during and after the term of the contract. Furthermore, neither the franchisor nor the franchisee may unilaterally terminate the agreement without just cause. Any early termination must follow the agreed-upon procedures, or else the liable party may face claims for damages.
Rights and Obligations
The franchisor can intervene in the organization and operation of the franchisee solely to ensure compliance with franchise standards. Such involvement is not considered interference, even in cases of mergers, splits, or statutory modifications by the franchisee.
This legal framework aims to protect the interests of both parties, promoting a transparent and fair business environment within the franchise sector in Mexico.
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