Franchises in Guatemala: agree terms for changes and refits

Buying a franchise means joining a network that needs to update its branding, technology and processes. However, an open-ended obligation to accept any change can turn a carefully planned investment into unpredictable expenditure. Before signing in Guatemala, check how manuals can be amended and refits required: maintaining standards should not mean accepting financial commitments without clear limits.

1. Identify what can change and who decides

Reviewing the premises’ initial design is not enough. Look in the contract for phrases such as ‘current brand image’, ‘mandatory updates’, ‘approved equipment’ or ‘manuals subject to amendment by the franchisor’. These can cover anything from replacing uniforms to completely refurbishing the premises.

Ask for the version of the manuals that will apply when you sign, along with any available history of amendments. You do not need access to confidential information unrelated to your assessment; confidentiality arrangements and controlled access can be agreed. The aim is to understand the scope of the obligations you will be taking on.

Classify changes into three groups:

• Routine operational changes: adjustments to procedures that can be made using existing resources.
• Exceptional capital expenditure: building work, replacement furniture, new equipment or technology migrations.
• Urgent measures: action needed to address safety risks or applicable legal requirements.

Ask who proposes each change, who approves it and how the need for it is demonstrated. A commercial recommendation should not automatically be treated as an urgent instruction. Also ask for a clear distinction between a voluntary trial and a mandatory network-wide rollout.

2. Understand Guatemala’s legal framework

Guatemala has neither a specific, comprehensive franchise law nor a general pre-contractual disclosure regime specifically for franchises. You should therefore not assume that the law requires you to receive a standardised document setting out future investment requirements, or a special period in which to assess it.

The Commercial Code, Decree 2-70, provides the commercial legal framework, while the Civil Code, Decree-Law 106, supplies supplementary rules relevant to obligations and contracts. The Industrial Property Law, Decree 57-2000, governs matters such as trade mark licensing and protection; it does not set a maximum refit budget for franchisees.

Nor is there a general compulsory franchise register that approves these financial commitments. Registration of a trade mark for protection should not be confused with official approval of the business model.

In this context, rights to receive notice, review budgets or request phased implementation must be expressly negotiated. A voluntary code of conduct may help guide the relationship, but it does not replace the contract or constitute Guatemalan law in its own right.

Instruct a local lawyer to review how the manuals are incorporated into the agreement and what limits apply to the power to amend them. Do not assume that every unilateral amendment will be valid or invalid: the wording and its compatibility with applicable law matter.

3. Set clear limits on future expenditure

Propose a dedicated schedule covering updates. It should describe the procedure, rather than simply promise that changes will be ‘reasonable’.

At a minimum, negotiate:

• Advance notice: a written communication channel, supporting documentation and sufficient notice for the complexity of the change.
• A complete budget: building work, installation, transport, training, equipment removal and any days when the business may have to close.
• Financial limits: a maximum amount or an objective formula for exceptional capital expenditure, with further consent required if that limit is exceeded.
• Frequency: a distinction between full refits and minor adjustments, preventing a single project from being split up to circumvent limits.
• Exceptions: separate treatment for urgent risks and legal obligations, without allowing any commercial update to be classified in this way.

Also clarify what will happen to equipment that still works and who will bear the costs of a trial that the franchisor decides to abandon. There is no universal allocation of costs: it must be agreed.

Prepare two internal scenarios, one assuming normal trading and the other a temporary closure. Include lost margin during the works, not just construction bills. This will help you assess whether the proposed timetable is feasible.

4. Keep the contract, manuals and implementation consistent

Establish an order of precedence for the documents. An operating manual should not, on its own, be able to introduce new fees, alter agreed investment limits or remove the approval procedure. Changes to those terms should be documented through the agreed contractual mechanism.

Ask for every update to state its version, date, rationale, affected outlets and compliance deadline. Keep notices and approvals; an informal conversation does not provide the same audit trail.

Finally, agree how to request extensions justified by permit requirements, equipment availability or the condition of the premises. If the premises are leased, also check which works require the landlord’s consent: the franchisor’s approval does not replace it.

Practical conclusion: before buying, insist that the contract answers three questions: what can you be required to change, how much can you be required to commit, and how much advance notice will you receive? If the answers depend entirely on future manuals, a significant part of your investment still lacks clear limits.