Franchise disclosure document in Guatemala: a practical guide

Before offering your business as a franchise in Guatemala, you need to explain what prospective franchisees will be buying, how much they will need to invest and what obligations they will take on. A franchise disclosure document, known locally as a circular de oferta de franquicia (COF), helps organise this information. This guide focuses on a specific task: preparing, checking and delivering that document without confusing good practice in the franchise sector with legal obligations that do not exist.

1. Distinguish voluntary disclosure from legal obligations

Guatemala has neither a comprehensive franchise law nor a specific legal framework requiring a COF and setting a general mandatory deadline for its delivery. A franchise agreement is treated as a commercial contract without a specifically defined statutory form. It rests on freedom of contract, the Commercial Code, Decree 2-70, and, where supplementary provisions are needed, the Civil Code, Decree-Law 106.

This does not mean that no rules apply to franchising. The Industrial Property Law, Decree 57-2000, governs key aspects of trade marks and their licensing. In addition, Article 27 of its implementing regulations, Government Agreement 89-2002, provides that, unless the parties agree otherwise, Article 45 of the law applies to the trade mark licence contained in a franchise agreement.

Do not confuse trade mark registration with a supposed requirement to register the franchise model. Nor should legislative proposals included in academic theses be treated as laws in force. Have the documentation reviewed by Guatemalan legal advisers, including any formalities applicable to the trade mark licence.

Association codes of ethics may impose disclosure commitments on their members. These are self-regulatory instruments, not national laws. If your business belongs to an association, check which rules it has accepted and reflect those commitments in your sales process.

2. Build the document around real decisions

The COF should be neither a sales brochure nor a complete copy of the operations manual. Its purpose is to enable an informed decision. Organise it around the following questions:

• Who is offering the franchise? Identify the individual or company entering into the agreement, their track record and their relationship with the brand. Distinguish between company-owned outlets, pilot outlets and franchisee-operated units.
• What rights are being granted? Describe the format, proposed location, agreement term and territorial scope. Explain whether exclusivity applies and how online sales, home deliveries and other channels will be handled.
• What will the prospective franchisee have to pay? Separate the initial franchise fee, fit-out, equipment, stock, permits, deposits and working capital. Identify which amounts are quotations, estimates or payments to the franchisor, and explain their tax treatment.
• What ongoing payments will apply? Explain royalties, advertising contributions, technology charges, mandatory purchases and renewal fees. State how charges are calculated, how often they are payable and what is included or excluded.
• What support will they receive? Specify the training, opening support, ongoing assistance and conditions for access to manuals.
• How can the relationship end? Summarise renewal, transfer, breaches of contract and post-termination obligations, referring readers to the agreement for details.

Also disclose the project's limitations. If there are no existing franchisees for candidates to consult, say so. A pilot outlet is not the same as a network of franchisees with a proven track record.

3. Support every claim with evidence

Before distributing the document, create an internal table with four columns: claim, supporting document, person responsible and review date. For example, a claim about trade mark ownership should be supported by registration records; a promise of training should be backed by a programme your team can deliver.

For the initial investment, retain quotations and record their location, date, scope and exclusions. A fit-out budget for premises that are already fitted out may be misleading if presented as applicable to any property.

If you include results from the pilot outlet, explain the period covered and relevant conditions: rent, the owner's involvement, seasonality and the costs included. Distinguish between sales, profit and cash flow. Do not present a projection as a historical result or an estimated payback period as a guarantee.

Finally, cross-check the COF against the agreement and sales materials. If the disclosure document offers exclusivity, the agreement should not reserve rights over incompatible sales channels without clearly explaining this. If it advertises support as included, identify any additional expenses. Resolve discrepancies before requesting a signature or payment.

4. Establish a documented, pressure-free disclosure process

Set a reasonable internal timeframe for prospective franchisees to review the COF and draft agreement with their advisers before making a commitment. Identify this as your own policy, not a deadline imposed by Guatemalan law. If an association code applies to your business, comply with its requirements too.

Give each disclosure document a version number and date. Record the recipient, documents supplied, questions and answers. An acknowledgement of receipt proves delivery; it does not replace explanations or remove liability for inaccurate information.

When fees, territory or other material terms change, provide an updated version and allow prospective franchisees to reconsider their decision. Protect operational secrets through confidentiality arrangements and staged access, without concealing essential costs or obligations.

Practical conclusion: before seeking prospective franchisees, prepare a COF supported by documentary evidence, check it against the agreement and test your disclosure process. A verifiable offer helps build clearer relationships within the franchise sector.