Franchises in Guatemala: how to verify sales claims

A sales presentation may show attractive figures without demonstrating that they are achievable at your location. Before entering Guatemala’s franchise market, it is worth checking where those figures come from. This guide explains how to review a brand’s projections, compare them with similar operations and document the information underpinning your decision.

1. Distinguish between results, projections and promises

A branch’s recorded sales, an estimate for a new outlet and a claim such as ‘you will quickly recoup your investment’ are not equivalent. Ask the franchisor to classify each figure and specify its source, the period it covers and how it was calculated.

For historical results, ask:

• Do they relate to company-owned or franchised outlets?
• Do they represent invoiced sales, payments received or orders placed?
• Do they include VAT, returns, discounts or cancellations?
• Do they reflect an exceptional month or a full reporting period?
• How long had each outlet been open?

Sales are not the same as profit or available cash. Although this review focuses on revenue, no turnover figure alone proves that a business is profitable.

Also ask for actual results to be distinguished from internal targets. A sales target may be useful for managing an operation, but it does not prove what a buyer will achieve.

2. Select genuinely comparable outlets

An established shop in a shopping centre does not necessarily indicate how a new street-front outlet will perform. Compare format, floor area, opening hours, accessibility, customer profile and sales channels. If the reference outlets are abroad, identify differences in prices, consumer habits and purchasing power.

Request monthly results covering a period long enough to reveal seasonal patterns, along with each outlet’s opening date. This will help you distinguish the initial boost, the learning period and the performance of an established operation.

Do not settle for the best-performing outlet. Ask how many outlets are included in the sample, how they were selected and whether closed or underperforming outlets were excluded. An average without that explanation can be misleading.

Where confidentiality restrictions apply, suggest anonymised data or a review by an accountant bound by confidentiality. You do not need access to customers’ personal information to assess whether the sales figures are consistent.

3. Cross-check the figures against evidence and local observations

Ask for sales system reports to be reconciled with the corresponding accounting records. A summary prepared to sell the franchise carries less weight than information that has been substantiated and reviewed. If you receive only isolated screenshots, record that limitation.

With permission, speak to franchisees operating comparable formats. Ask how long their sales took to stabilise, which months are weakest and what differences they found compared with the initial presentation. Their accounts provide context, but are no substitute for documents.

Next, reconstruct the projection for the proposed outlet:

Estimated monthly sales = daily transactions × average transaction value × trading days.

Examine each assumption. Does the observed footfall support that number of transactions? Does the average transaction value reflect prices applicable in Guatemala? Can the outlet handle that many orders?

Visit the area on different days and at different times. Separate in-person sales from deliveries to avoid counting the same demand twice. Prepare conservative, base-case and favourable scenarios, explaining what changes in each; do not present any of them as a guarantee.

4. Understand what Guatemala’s legal framework requires

Guatemala has no specific franchise law or general mandatory pre-contractual disclosure regime for franchises. A business is therefore not legally required, simply because it is a franchise, to provide a disclosure document containing a prescribed financial history.

The relationship is governed primarily by the Commercial Code, Decree 2-70, with the Civil Code, Decree-Law 106, applying on a supplementary basis. The Industrial Property Law, Decree 57-2000, regulates matters such as trade marks and their licensing; it does not establish a general system for validating sales projections.

The absence of a specific law does not remove general requirements of good faith or make every sales claim acceptable. However, it does not automatically give you unlimited access to the franchisor’s accounts either. Negotiate that access and seek local legal advice on the consequences of false information or material omissions.

5. Document what you have verified before deciding

Prepare a table with four columns: figure presented, evidence received, outstanding assumption and person responsible for clarifying it. Keep dated versions of presentations, emails and replies.

Ask for the information critical to your decision to be identified in a schedule to the contract, distinguishing historical data from estimates and noting their limitations. Ask your lawyer to review any clause stating that you have not relied on prior information if that statement contradicts what actually happened.

Practical conclusion: do not buy solely on the strength of an attractive figure. Make your decision once you can explain where it comes from, why it is comparable with your outlet and what uncertainties remain.