Franchising in Guatemala: how to agree on your territory

Buying a franchise in Guatemala does not mean the brand will stop opening outlets near yours. In franchising, territorial protection depends on what is actually agreed, not on a sales promise that an area is ‘available’. Before choosing a brand, assess which area you will be able to serve, who else will be allowed to sell there and how conflicts between sales channels will be resolved.

1. Distinguish between an authorised location and a protected territory

Permission to operate from specific premises does not give you exclusivity over the surrounding neighbourhood, municipality or department (an administrative division in Guatemala). The contract may allow you to open at one address while reserving the franchisor’s right to establish another outlet nearby.

Distinguish between three concepts:

• Authorised location: the premises where you may run the business.
• Operating territory: the area in which you may advertise, deliver orders or seek customers.
• Protected territory: the area in which the franchisor accepts explicit restrictions on other openings or sales.

The word ‘exclusive’ is not enough either. The agreement must clarify whether it prevents brand-owned outlets, outlets run by other franchisees, or both. You also need to know whether it covers smaller formats, kiosks, delivery-only kitchens and sales points inside supermarkets.

Compare brands by the actual scope of their protection, not just the size of the area on the map. A large territory with numerous exceptions may offer less commercial security than a smaller, clearly defined one.

2. Understand what Guatemalan law protects

Guatemala has no franchise-specific legislation or general mandatory pre-contractual disclosure regime specifically for franchises. Nor is there a compulsory franchise register that, in itself, grants territorial exclusivity.

The relationship is governed by the contract and the applicable general laws, particularly the Commercial Code, Decree 2-70, and the Civil Code, Decree-Law 106. The Industrial Property Law, Decree 57-2000, governs the protection of trade marks and other industrial property rights, as well as aspects of trade mark licensing.

Registering a trade mark is not the same as registering a business model or reserving a trading area for a franchisee. These are separate matters: one concerns rights over the distinctive sign; the other concerns the scope of the obligations agreed between the parties.

Do not therefore assume that you have the right to prevent a nearby opening or receive compensation for lost sales. Those rights must be defined and legally enforceable. Ask a Guatemalan lawyer to review the territorial clause and check that it complies with the applicable mandatory rules.

3. Turn the territorial promise into verifiable rules

The description should allow someone who was not involved in the negotiations to identify the boundaries without guesswork. Avoid expressions such as ‘catchment area’ or ‘the area around the premises’ unless they have an objective definition.

Include a schedule setting out the map, boundaries and a rule for resolving discrepancies between the map and the written description. If you use a radius, specify the point from which it is measured and whether the distance is measured in a straight line or by road.

Then answer these questions in writing:

• Which existing outlets are exempt from the restrictions?
• Can the brand open inside shopping centres, airports or shops within the area?
• Can another franchisee target advertising at residents of your territory?
• What happens when a business customer has branches in different territories?
• Who authorises boundary changes, and through what procedure?

If protection depends on sales targets, these must have a clear calculation method, assessment period and consequences. Negotiate advance notice and an opportunity to remedy any failure before losing protection. Avoid allowing the franchisor to reduce the territory unilaterally through a simple update to the operations manual.

4. Include digital channels and check commercial viability

A map alone does not resolve sales through apps, the central online shop or deliveries from another branch. The contract must explain how orders are allocated: by delivery address, customer choice, availability or another rule.

Clarify who issues invoices, who handles complaints and who bears the cost of discounts, commissions and delivery. If a sale fulfilled by your outlet attracts royalties, confirm the amount on which they are calculated and how you can verify it.

Finally, assess whether the area can support the business. Look at footfall, access, competition and demand at different times of day. Prepare one financial scenario with lower-than-expected sales and another with new outlets permitted under the contractual exceptions. Exclusivity does not guarantee customers or profitability.

Practical takeaway: choose a brand whose territory you can identify, whose sales channels you can understand and whose obligations you can enforce. Before committing your investment, turn the map and sales promises into a contractual schedule reviewed by a local legal adviser.