Franchising in Guatemala: check mandatory purchasing requirements

A franchise may look profitable until you check where you must buy its ingredients, packaging, equipment or products for resale. In franchising, centralised purchasing helps maintain quality, but it can also create dependency. Before choosing a brand in Guatemala, assess its sourcing requirements: you need to know what they cost, who is responsible for deliveries and what you can do if a supplier lets you down.

1. Identify which purchases are genuinely mandatory

A supplier list alone is not enough. Request a list of the items essential to running the business and classify them by the restrictions that apply:

• Exclusive purchasing: you can only buy from the franchisor or a specified supplier.
• Approved supplier: you can choose from several pre-approved businesses.
• Technical specification: you can buy freely, provided you meet verifiable quality requirements.

This distinction helps you understand whether the brand is protecting a recipe, a presentation format or a technical standard, or requiring exclusive purchasing even for items that could easily be sourced elsewhere.

Check less obvious obligations too: minimum orders, bundles combining products that sell at different rates, compulsory opening stock and mandatory equipment replacement. Ask whether promotions require you to buy additional stock and who bears the cost of any leftovers.

Cross-check the contract against its schedules and the manual. If one allows you to choose suppliers while another requires a sole distributor, ask for the contradiction to be resolved in writing. It should also be clear which document takes precedence and how purchasing terms can be changed during the relationship.

2. Calculate the cost of receiving and using each product

The catalogue price does not necessarily reflect the true cost. For each significant item, add transport, insurance, storage and, where applicable, customs charges and non-recoverable taxes. If you buy in a foreign currency, factor in exchange rate movements and payment fees.

Ask your accountant to distinguish taxes that represent a cost from those that may qualify for a tax credit. Both may require cash at the point of purchase, but their economic treatment differs.

Compare equivalent alternatives using a simple table:

Item	What to check
Price	Currency, validity period and applicable discounts
Minimum order	Required quantity and purchasing frequency
Yield	Saleable units produced by each pack size or format
Expiry	Remaining shelf life when the order arrives
Delivery	Freight charges, destination and responsibility for taking delivery
Problems	Returns, replacements and credit notes

Compare costs per usable unit, not just per box. An apparently cheap product may prove more expensive if it arrives with little shelf life remaining or requires you to store quantities you will not sell in time.

Request current quotations for your specific location in Guatemala. Also ask whether the franchisor receives commissions or discounts from suppliers and whether these benefits are passed on to franchisees. Do not assume they are: this must be expressly agreed.

3. Negotiate procedures for shortages and price changes

A purchasing obligation needs rules for foreseeable problems. Ask for the contract or its supply schedule to set out delivery times, acceptance criteria and a procedure for reporting shortages, damage or failures to meet quality standards.

If supplies depend on imports, establish who will act as the importer, who will arrange the necessary permits and when the risk of loss of the goods transfers. The brand's commercial authorisation does not replace any applicable customs or health requirements.

Negotiate an alternative purchasing procedure for emergencies. This could include minimum specifications, documentation from the replacement supplier, a response deadline and temporary approval. Do not assume that a shortage allows you to substitute products unilaterally.

For pricing, seek advance notice of changes and a clearly defined method for making adjustments. Avoid relying on a clause that allows any price or charge to be changed immediately and without explanation. If a business other than the franchisor supplies the goods, check who has obligations towards you: a promise from the brand may not bind the supplier.

4. Distinguish legal rights from negotiated rights

Guatemala has no specific franchise law or special mandatory pre-contractual disclosure regime for franchises. A franchise disclosure document may be good practice, but it should not be presented as a document required under a Guatemalan franchise law.

The relationship is governed primarily by the Commercial Code, Decree 2-70, the Civil Code, Decree-Law 106, and, for trade mark and licensing matters, the Industrial Property Law, Decree 57-2000. Article 280 of the Commercial Code excludes commercial franchises from the chapter on agents, distributors and representatives; you should not assume that the protections under that regime automatically apply to franchises.

Being a franchisee does not, in itself, give you the right to buy from third parties, receive compensation for delays or review supplier discounts. These rights must be assessed against the contract and applicable law. Instruct a local lawyer to review the restrictions and remedies for breach of contract.

Practical conclusion: before committing, prepare a matrix of mandatory purchases, calculate their delivered cost and agree on a procedure for supply disruptions. A good brand should be able to explain both its standards and the terms on which you will receive supplies.