Franchises in Guatemala: agree on pricing and discounts

A promotion can attract customers while leaving little money to cover operating expenses. Before buying a franchise in Guatemala, check who decides prices and who bears the cost of each discount. Across a franchise network, shared campaigns need clear rules so that the customer experience does not depend on costs the buyer never budgeted for.

1. Distinguish recommended prices from contractual obligations

Receiving a menu or price list is not enough. Ask for a written explanation of how the prices your outlet will charge are set, updated and communicated. The key question is: which decisions can you make independently, and which will require approval?

Ask the franchisor to distinguish between recommended prices, voluntary promotions and terms it intends to make compulsory. Then instruct a Guatemalan lawyer to review the validity and scope of those terms; a restriction is not necessarily permissible simply because it appears in a contract.

Clarify specific situations:

• Whether you can adjust prices when your local costs rise.
• Whether you may offer discounts to regular customers.
• Whether prices can differ for in-store sales and deliveries.
• Whether you can decline a promotion that would generate a loss on each transaction.
• Who approves exceptions and how quickly they must respond.

An answer such as ‘we all follow the brand’s policy’ is not enough. Ask to see that policy and check whether it sets out a workable procedure or leaves every decision to the franchisor’s discretion.

2. Calculate who funds each promotion

Ask for examples of previous campaigns and their settlement rules, if available. You do not need to treat their results as promises of future sales: you need to understand how the money flows.

For each promotion, identify the standard price, the discount, the amount the customer pays and any reimbursement you would receive. Also itemise variable costs: the product or service, packaging, electronic payment processing, delivery and any other applicable charges.

The advertised discount does not necessarily represent the franchisee’s total cost. An offer may require a free item, more expensive packaging or an additional platform fee. If several benefits can be combined, your margin may shrink further.

Prepare a simple summary for each campaign:

• Each party’s contribution: how much you absorb and how much the franchisor covers.
• Settlement: when you will receive reimbursement and what supporting documents you must provide.
• Limits: products, quantities, dates and participating outlets.
• Combining offers: whether the promotion can be used with vouchers, membership benefits or other offers.

Also check how discounts will be treated when calculating royalties under the contract. Do not assume that the system will automatically deduct a promotional discount from the amount on which royalties are charged.

3. Negotiate a procedure before accepting campaigns

The aim is not to prevent joint initiatives, but to avoid open-ended commitments. Propose that campaigns be communicated far enough in advance for you to review stock levels, service capacity and available cash.

Ask for each campaign notice to include its duration, participating products, customer terms and allocation of costs. If the franchisor contributes funding, agree on a payment deadline and a process for disputing discrepancies. A pending reimbursement may force you to finance a campaign even if another party ultimately bears the expense.

It is also worth defining what happens when an offer is advertised by mistake or remains visible after it has ended. Establish who corrects the advertisement, who handles complaints and how the cost of resolving them is shared, without compromising consumer rights.

For vouchers or benefits redeemable across outlets, ask who received the original payment and who must provide the service. Accepting a benefit sold by another outlet requires a compensation rule, not just an instruction to serve the customer.

4. Apply Guatemala’s legal framework

Guatemala has no specific franchise law and does not generally require a pre-contractual disclosure document or special franchise registration. You should therefore not expect a mandatory form to set out these commercial policies before you sign: request them explicitly.

The relationship is governed by the Commercial Code, Decree 2-70, with the Civil Code, Decree Law 106, applying where necessary to supplement it. The Industrial Property Law, Decree 57-2000, regulates matters such as trademark licensing. Freedom of contract does not override applicable mandatory legal provisions.

In dealings with customers, the Consumer and User Protection Law, Decree 6-2003, must also be considered when reviewing pricing information, advertising and promotional terms. The internal allocation of responsibilities does not allow those obligations to be ignored. Seek local legal advice on pricing restrictions and campaign rules before accepting them.

Practical conclusion: before buying, insist on a written policy and work through the full financial implications of a promotion. If you cannot determine how much you will charge, how much you will retain and when you will receive any compensation, an essential term still needs to be negotiated.