Franchises in Guatemala: when the franchisor changes

When buying a franchise in Guatemala, you assess a particular company and team. During the relationship, however, they may sell the brand, bring in new owners or transfer contracts to another entity. In franchising, these changes can help keep a business running, but they can also change who is accountable to you. Before signing, check what would happen if your contractual counterparty changed and what protections would be set out in writing.

1. Distinguish what is actually changing

Not every business sale changes the legal entity that signed the contract with you. Understanding the transaction helps you avoid accepting vague explanations such as ‘only the owner is changing’.

It is worth distinguishing three situations:

• Sale of shares or ownership interests: the owners of the franchisor company change, but the company may remain your contractual counterparty. Check whether the contract expressly addresses a change of control.
• Transfer of the contract: another entity intends to take over the franchisor’s position. You need to examine how rights and obligations will be transferred, what consent is required and who remains responsible for outstanding commitments.
• Sale of the brand: ownership of a key asset changes. This does not, in itself, mean that the buyer takes on all the training, support or supply obligations under the franchise agreement.

Ask the seller to explain the relationship between the entity that collects payments, the one that provides support and the one that controls the trade mark rights. If they are different entities, ask which obligations each takes on and how that structure would be maintained after a sale.

The central question is not just who the new owner will be, but who will remain obliged to fulfil their commitments to you.

2. Understand Guatemala’s legal framework

Guatemala has no specific franchise law or mandatory franchise-specific pre-contractual disclosure regime equivalent to a franchise offering circular. You should therefore not assume that special protection exists allowing you to reject any change of ownership automatically.

The relationship is governed primarily by the Commercial Code, Decree 2-70, the Civil Code, Decree-Law 106, and the Industrial Property Law, Decree 57-2000, in relation to trade marks and other protected rights.

Article 669 of the Commercial Code establishes principles of honesty and good faith in the interpretation and performance of commercial obligations. Article 280 also excludes commercial franchises from the provisions of the chapter on commercial agents, distributors and representatives. Protections provided for those other relationships should not automatically be assumed to apply to franchisees.

The Industrial Property Law requires a trade mark licence to be in writing and includes provisions applicable to franchises. However, the trade mark licence and the wider contractual relationship are not the same thing: securing the right to use the brand does not, on its own, settle who will provide support or handle claims.

A local lawyer should review the effects of the specific transaction and the proposed clauses. Any protections you negotiate should not be presented as automatic rights established by a special franchise law.

3. Negotiate conditions for continuity

Find the section that allows the franchisor to transfer the contract, restructure or transfer its rights. Broad permission without conditions governing its obligations deserves particular attention.

Propose that the contract address the following points:

• Written notice: which changes must be notified, how much advance notice should be given where possible, and what information you will receive about the new entity.
• Assumption of obligations: how it will be documented that the incoming entity takes on the relevant contractual commitments, rather than merely the right to collect payments.
• Ability to fulfil commitments: what evidence it must provide of its trade mark rights and its resources to continue delivering the agreed services and support.
• Financial terms: confirmation that the change will not, in itself, justify new fees or unilateral changes to agreed terms.
• Outstanding liabilities: who will deal with claims, outstanding balances, prepaid services and obligations left unfulfilled before the change.

You can also negotiate a requirement for your prior consent in specified circumstances, or a right to terminate following defined changes that materially harm the relationship. The scope, procedure and consequences must be precise; simply stating that you can leave if the new owner ‘does not suit you’ is not enough.

4. Test the clause against a concrete example

Before signing, put forward this scenario: you have paid for training that has not yet been delivered, and the franchisor transfers the contract while selling the brand to another company.

Ask for written answers: who will deliver the training? Who will authorise continued use of the brand? Against whom will you bring a claim if no one fulfils the obligations? Will the original company be released from its obligations? What document will evidence the change?

If the answers depend on future agreements that you will not be able to review, there is uncertainty that should be resolved before investing. You do not need to prevent every corporate restructuring; you need a clear procedure that preserves the obligations already undertaken.

Practical conclusion: identify which changes the contract permits and insist on clarity about notice, continuity and responsibility. A sale of the franchisor should not leave you trying to work out who must deliver what you paid for.