Franchising in Guatemala: align your premises lease with your franchise agreement

Attractive premises can become a costly commitment if the lease does not fit with the franchise agreement. Before joining a franchise network in Guatemala, review both agreements as a single investment decision. The franchisor’s approval does not bind the landlord, and signing a lease does not guarantee that you can operate under the brand at that location.

1. Confirm that the premises can accommodate the proposed business

Before paying any money or committing to rent, request a draft lease and compare it with the franchisor’s requirements. The aim is to check that the property can accommodate your specific business, rather than simply allowing general commercial activity.

Check, at a minimum:

• Permitted use: the description should cover the premises’ main and ancillary activities.
• Alterations and fit-out: what work you can carry out, who must approve it and what will happen to fixtures and fittings when you hand back the property.
• External branding: the conditions for putting up signs, altering the façade or installing branded features.
• Day-to-day operations: opening hours, supplier access, loading and unloading, waste management and building restrictions.
• Available services: electrical capacity, water supply and any other technical requirements for your chosen business format.

Ask the franchisor for written approval identifying the property and the conditions assessed. If approval depends on outstanding works or checks, ask for these to be specified. A site visit by a sales representative does not necessarily amount to final approval.

Also consult local professionals to confirm technical feasibility and the permits required. Neither the brand’s approval nor the landlord’s consent replaces the necessary approvals from public authorities.

2. Apply Guatemala’s legal framework without assuming protections exist

Guatemala has no specific law comprehensively regulating franchises, nor a special mandatory pre-contractual disclosure regime for these relationships. You should therefore not assume that franchise-specific protections will allow you to cancel the lease automatically if the arrangement with the brand falls through.

Franchise relationships are governed primarily by the Commercial Code, Decree 2-70, with the Civil Code, Decree-Law 106, applying on a supplementary basis. The latter also contains the general rules on leases that should be reviewed for the premises. The Industrial Property Law, Decree 57-2000, is relevant to the trade mark and its licensing.

Article 669 of the Commercial Code establishes principles of acknowledged truth and good faith for interpreting and performing commercial obligations. However, this does not remove the need for the parties responsible for each obligation to agree specific terms.

Instruct a Guatemalan lawyer to review both contracts together. They should identify who will be the tenant, who will acquire the franchise and whether any difference between those parties requires additional authorisations. Do not assume that entering into the contracts through related companies resolves that difference.

3. Align your commitments before you start paying

Draw up a timeline covering signing, handover of the property, the start of rent payments, fit-out and the start of the franchise. This will help identify periods when you would be paying for premises that you cannot yet use for the intended business.

If you need to secure the property before obtaining the brand’s final approval, propose a contractual condition for your lawyer to review. It should specify which approval is outstanding, how it will be evidenced, the deadline for obtaining it and the consequences if it is not obtained. Simply writing ‘subject to approval’ is not enough unless its effects are clearly defined.

Also compare the lease term with the period during which you will have the right to operate the franchise. A mismatch could leave you liable for rent without being able to use the brand, or with an ongoing franchise agreement but no premises. Ask what contractual options are available to reduce this risk, without assuming that you will be able to extend either agreement.

In your budget, separate rent, deposit, maintenance charges, utilities and fit-out costs. If you negotiate a rent-free period to carry out works, document which payments are suspended and which remain due.

4. Record who is responsible for each property issue

Draw up a list allocating responsibility for leaks, existing installations, structural repairs and routine maintenance. Compare the landlord’s commitments with the brand’s technical requirements, and record the property’s condition at handover in a written report supported by photographs.

Also clarify what happens if a defect in the property prevents you from implementing the approved design. Negotiate who will assess the problem, who will pay to resolve it and how it will affect the date rent becomes payable. A promise by the franchisor about work for which someone else is responsible does not, by itself, bind the property owner.

If the brand requests access to the premises or rights to intervene in certain circumstances, check that the lease permits this and define the limits of those rights. Any commitment that falls to the landlord must have their agreement, rather than appearing only in the franchise contract.

Practical conclusion: before committing to the premises, bring together three compatible documents: the brand’s written approval, a reviewed lease and a schedule of obligations. Do not sign while one promises something that another prevents.