Franchises in Mexico are governed and regulated by the Industrial Property Law (IPL) and its regulations. According to article 142 of the IPL:

 

A franchise exists whenever, in conjunction with a licence to use a trademark granted in writing, technical knowledge is transmitted or technical assistance is furnished in order to enable the licensee to produce or sell goods or render services in a uniform manner and with the operating, commercial and administrative methods established by the holder of the trademark, with the goal of maintaining the quality, prestige and image of the products or services distinguished by the trademark.

 

The governmental agency in charge of applying the IPL is the IMPI (the Mexican Institute of Intellectual Property). In addition, there are other laws that may have an application to franchises depending on the type of activity performed in Mexico, such as the Commerce Code, the Consumer Protection Federal Law, the Economic Competition Federal Law (the Antitrust Law), the General Law of Business Organisations and the Federal Civil Code.

 

The IPL requires that, prior to granting a franchise, the franchisor’s information (disclosure document) must be provided to the prospective franchisee at least 30 business days before the execution of the franchise agreement. The IPL does not provide for any obligation to update the information contained in the disclosure document, which must be accurate at the time it is delivered to the prospective franchisee. Failure of a franchisor to provide the disclosure document at least 30 business days prior to the date of execution of a franchise agreement may result in the imposition of an administrative fine by the IMPI.

 

This will only occur, however, if the franchisor fails to provide such information after a written request for it has been made by the prospective franchisee to the franchisor. In the event of lack of veracity of the disclosed information, the franchisee will be entitled to request the judicial authority to nullify the franchise agreement and to award payment of corresponding damages and losses.

 

Additionally, franchise agreements must be in writing and contain certain provisions such as the fees to be charged, the geographical zone in which the franchisee will operate, the location, minimum size and investment requirements for developing the location, if applicable, the policies of inventories, marketing and advertising, as well as the provisions relating to the merchandise supply and the engagement with suppliers, training and support provided by the franchisor and termination, and renewal provisions.

 

Commercial activities and contracts in Mexico, such as franchise agreements, are regulated by the general principle of contractual liberty, which applies to all provisions and aspects of a franchise agreement not specifically regulated by the IPL.

 

The IPL makes no distinction in its applicability to master franchises or individual or unit franchises. Its provisions and the disclosure obligations apply to all types of franchises to be established in Mexico. The IPL requires ‘the grantor of a franchise’ to provide disclosure to a prospective franchisee. This requires any franchisor, including a master franchisee acting as franchisor, to provide disclosure to the prospective franchisee.