Discounts and Promotions in Guatemalan Franchise Networks

A promotion that is profitable in your own business can generate losses when run by a franchisee with a different cost structure. Before franchising in Guatemala, you need to decide how discounts will be proposed, funded and evaluated. A clear policy helps your franchise network maintain the customer experience without passing unexpected costs on to those running each outlet.

1. Calculate the true cost of each promotion

It is not enough to check that an offer increases sales. You need to know how much each transaction generates after the discount and associated costs. Use records from your existing business to prepare a financial breakdown for each promotion.

Include, at a minimum:

• The standard price and promotional price.
• The cost of the product or of providing the service.
• Packaging, delivery, payment processing fees and platform commissions.
• Any confirmed supplier contribution.
• Royalties and other fees payable under the agreement.
• Additional staffing or material costs needed to run the campaign.

Distinguish variable costs from fixed overheads. The contribution margin on a promotional transaction helps you assess whether each sale contributes towards rent and other commitments; it is not the same as the outlet’s final profit.

Do not automatically assume that results from your own outlet will apply elsewhere. A franchisee may pay different rent, face different delivery costs or be unable to access your purchasing terms. Work with documented scenarios and establish when a campaign must be reviewed before it is rolled out more widely.

2. Define who proposes, pays and participates

Distinguish campaigns proposed by the franchisor from local initiatives proposed by franchisees. For each type, identify who develops the offer, reviews its viability, approves the use of the brand and bears the cost.

The policy should answer specific questions: does the outlet absorb the discount? Will the franchisor reimburse it? Will the supplier provide additional products? Who pays for advertising materials? Where costs are shared, document the calculation, the supporting evidence required and the settlement deadline.

You also need to settle how royalties will be treated. A promotion does not, in itself, change the agreed calculation basis: the agreement must clarify how discounts, coupons, refunds and third-party contributions are treated. Avoid situations where accounting and operations interpret the same sale differently.

Participation and any financial commitments must be clear before launch. Do not confuse approval of an advertising item with agreement to fund it. Nor should you promise reimbursement without a confirmed source of funding.

3. Set out the policy in legally compliant documents

Guatemala has no specific franchise law or mandatory franchise offering circular regime. A franchise agreement is treated as a commercial contract without a specifically prescribed statutory form: the Commercial Code, Decree 2-70, applies, supplemented by the Civil Code, Decree-Law 106. Freedom of contract does not permit parties to disregard other applicable rules.

The Industrial Property Law, Decree 57-2000, is relevant to the use of trade marks in campaigns. Offers made to the public must also comply with the Consumer and User Protection Law, Decree 6-2003, particularly regarding the information provided and the terms offered.

Allocate the rules across documents with distinct purposes:

• Franchise agreement: financial responsibilities, the extent of participation and the mechanism for agreeing campaigns.
• Operations manual: the application procedure, approval of materials, till configuration and retention of supporting records.
• Campaign brief: products, participating outlets, promotional dates, terms and those responsible for that particular campaign.

Before setting mandatory prices or restrictions on local discounts, seek legal advice on the applicable competition rules. Control over brand image does not automatically justify every commercial restriction.

4. Test delivery and settle the accounts

Before advertising an offer, make a test purchase through the payment system. Check that the discount is applied correctly, the terms are understandable and staff know how to handle combined coupons, stock shortages and returns.

For example, an offer giving a discount on a second product needs to specify which products qualify, which product the discount applies to and whether it can be combined with other benefits. The advertising, staff instructions and amount charged must all be consistent.

Once the campaign ends, compare the expected margin with the actual result, record any issues and settle outstanding contributions. Also consider whether the offer displaced purchases that would normally have been made at full price.

Practical conclusion: before franchising, document and test a promotion from start to finish. If you cannot explain who funds it, how customers are charged and how the accounts are settled, it is not yet ready to be replicated.