Franchising in Guatemala: agree how disputes will be resolved

Before buying a franchise in Guatemala, check how you can bring a claim if a disagreement arises. A dispute resolution clause can determine where you will have to defend your position, which procedure you will follow and what costs you will need to budget for. In franchising, agreeing these rules is not a sign of distrust: it allows you to address differences without having to improvise once your investment is committed.

1. Understand the legal framework and the chosen procedure

Guatemala has no specific law comprehensively regulating franchising, nor a special mandatory pre-contractual disclosure regime. The relationship is governed primarily by the Commercial Code, Decree 2-70, and the Civil Code, Decree-Law 106. The Industrial Property Law, Decree 57-2000, regulates matters such as trade marks and their licensing.

If the parties choose arbitration, the Arbitration Law, Decree 67-95, must also be considered. Arbitration is not an internal process run by the brand: it allows certain disputes to be submitted to arbitrators, whose decision is known as an award. Its scope, validity and enforcement require a legal review of the agreement and the applicable rules.

Distinguish between three issues that often appear together:

• Governing law: the rules under which the contract will be assessed.
• Decision-making body: the courts or an arbitral tribunal.
• Location of proceedings: where they will take place and, in arbitration, what the legal seat will be.

Choosing a foreign law does not mean that mandatory Guatemalan rules cease to apply. Ask a local lawyer to check how these choices interact, especially when the franchisor is based outside the country.

2. Design a preliminary negotiation process that does not block a claim

Resolving a disagreement directly can avoid costs and preserve the relationship. However, an open-ended obligation to ‘exhaust amicable discussions’ can create another dispute: when the parties are allowed to begin formal proceedings.

Propose a simple sequence. First, written notice identifying the problem, the obligation in dispute and the remedy sought. Next, a meeting between representatives authorised to negotiate. Finally, a defined period in which to reach an agreement or bring that stage to a close.

Clarify in the contract:

• The address and person to whom notice must be sent.
• How receipt will be evidenced.
• When the negotiation period begins and ends.
• What happens if one party does not respond or participate.
• How any agreement reached will be documented.

Do not assume that negotiations suspend the legal time limits for bringing a claim. Seek advice on how to avoid missing those deadlines. It is also worth checking that this stage does not prevent you from seeking urgent measures where appropriate, for example to preserve evidence or prevent immediate harm.

3. Assess whether you can afford to use the procedure

A route for bringing a claim is of little use if it is financially inaccessible. Before accepting arbitration or court proceedings in another country, estimate the costs of legal advice, travel, translations, expert evidence and local representation. Do not base your comparison solely on the timescale promised by the seller.

If arbitration is предусмотрed, ask for the exact name of the administering institution, if there is one, and the rules that will apply. Review the seat, language, number of arbitrators, how they will be appointed and the advance payments required for costs. A tribunal with several arbitrators may involve different costs from a sole arbitrator; request an estimate suited to the type of claim that might arise.

Also check who pays costs upfront and how their final allocation will be decided. Do not assume that you will recover all your legal fees even if the decision is in your favour.

Run a practical test: imagine a claim concerning a disputed contractual charge. How much would it cost to bring? What documents would you need? Where would the other party have assets against which a decision could be enforced? This last question deserves particular attention when contracting with a foreign company.

4. Protect your position while the dispute is being resolved

Review which obligations continue during the dispute. Bringing a claim does not automatically entitle you to suspend payments, abandon operating standards or stop complying with the contract. Before taking such steps, seek advice on their consequences.

Negotiate how disputed amounts will be handled and how operational communication will continue. Do not confuse a solution proposed during negotiations with a final agreement: any settlement must specify obligations, who is responsible for fulfilling them and the relevant dates.

Keep the signed contract, amendments, invoices, payment records and relevant correspondence. After an important conversation, send a written summary and request confirmation. Keep this evidence organised and retain it lawfully, observing any applicable confidentiality requirements.

Finally, check that the various transaction documents do not impose incompatible procedures for related disputes. The franchise agreement and other associated agreements may involve different counterparties; your lawyer should identify that risk before you sign.

Practical conclusion: do not sign unless you can explain who will resolve a dispute, where, through which steps and at what likely cost. A clear clause should provide a route for bringing a claim that you can actually use.