Franchising in Guatemala: check the premises lease

Attractive premises can become a costly commitment if the lease does not allow you to operate as the brand requires. Before buying a franchise in Guatemala, review the franchise agreement and the lease together: the franchisor’s approval does not replace permits or bind the landlord. Aligning these documents can help you avoid paying for premises where you cannot yet open for business.

1. Check that the premises can accommodate the business

It is not enough for the advert to describe the property as ‘commercial premises’. The use permitted under the lease must match the business you will actually run. A café that prepares food, offers home delivery and opens late may need different conditions from a shop that only sells packaged products.

Ask the landlord for documents confirming their identity and authority to let the property. If a representative is signing, a lawyer should check their authority to act. It is also worth checking the property’s registration status and any restrictions that could affect its use.

Before committing, check three levels of approval:

• Landlord or property management: permitted use, opening hours, signage, loading and unloading, building works and supplier access.
• Relevant authorities: municipal requirements and, depending on the business activity, health, environmental or other applicable permits.
• Franchisor: written acceptance of the location and its technical specifications.

Arrange an assessment of electricity, water, drainage, ventilation and accessibility against the needs of the business. The brand’s approval does not establish that the facilities are adequate or guarantee that you will obtain permits.

2. Understand what the law protects and what you need to negotiate

Guatemala has no specific, comprehensive franchise law or general mandatory pre-contractual disclosure regime for franchising. There is therefore no public review under such a framework certifying that the premises or investment are suitable.

The franchise relationship is governed, as applicable, by the Commercial Code, Decree 2-70, and the general contract rules in the Civil Code, Decree-Law 106. The Civil Code also contains the rules governing leases. The Industrial Property Law, Decree 57-2000, regulates matters such as trade marks and their licensing; it does not authorise the use of any property as business premises.

Nor should trade mark registration be confused with a supposed mandatory franchise registration. Registering a trade mark licence is not a general requirement for that licence to be valid. Permits for the premises are a separate matter and must be checked according to the business activity and location.

As a buyer, do not assume that you automatically have the right to suspend rent payments if the franchisor delays approval or a permit does not come through. These protections need to be assessed and, where appropriate, expressly negotiated. A Guatemalan lawyer should review both contracts and the obligations you will take on towards each party.

3. Coordinate handover, permits and the start of payments

The main risk arises when each document follows a different timetable. The landlord may start charging rent from the date of signing, while the franchisor requires you to open on a date that does not allow for building works or permit processing.

Prepare a table covering these milestones: physical handover of the premises, location approval, authorisation for works, equipment installation, obtaining permits and opening. For each one, identify who is responsible, the supporting documentation and the consequences of a delay.

Negotiate the following, as appropriate:

• Clear handover requirements: describe the condition of the premises, the available utilities and any work the landlord must complete.
• Fit-out period: clarify whether there is a rent-free period and whether maintenance or other charges are payable during it.
• Outstanding conditions: specify what happens if an essential permit is refused or the location does not receive final approval.
• A deadline: avoid remaining bound indefinitely while waiting for authorisation.

Also compare the lease term with the period during which you will be entitled to operate the franchise. Do not assume that the lease will be renewed simply because the brand envisages a longer relationship. Any negotiated terms must be recorded in writing; sales messages or verbal promises are not enough.

4. Calculate the full cost of occupying the premises

The advertised rent does not represent the full cost of the premises. Ask for a breakdown of maintenance, security, parking, shared services, required insurance and any management charges. Clarify which amounts include tax and which are billed separately.

Check how the rent is adjusted, which currency it is payable in and how any currency conversion is calculated. Also identify deposits and personal guarantees: even if a deposit is refundable, it ties up money you need to open.

Prepare two scenarios: opening as planned and a delayed opening. In both, include the payments for the premises that would continue to fall due without any sales income. If the second scenario jeopardises your ability to operate, you need to renegotiate the terms or find different premises.

Practical takeaway: do not sign the lease in isolation. Make your decision once you have documented confirmation that the permitted use, permits, brand approval, opening timetable and total occupancy costs align.