Premises and leases when franchising in Guatemala

When franchising an existing business in Guatemala, approving premises should involve more than checking that they resemble the original outlet. A property may look attractive yet be unsuitable for the intended activity or require building work whose cost will be difficult to recoup. To grow a franchise network, it is worth coordinating three decisions: commercial approval of the premises, signing the lease and authorisation to open.

1. Define what approving premises means

Before presenting the franchise to prospective investors, turn the business’s physical needs into a premises specification. The aim is not to replicate your existing outlet exactly, but to identify the conditions needed to deliver the concept without costly alterations.

Include, where relevant:

• Usable floor area and the layout of customer, working and storage areas.
• Electrical capacity, water supply, drainage, ventilation and extraction.
• Access for customers, staff and deliveries.
• Permission to install signage and branding elements.
• Restrictions on opening hours, noise, waste, loading and unloading.
• Essential building work and the condition in which the premises must be handed over.

Distinguish between mandatory requirements and desirable features. If a café needs extraction and the building does not allow it to be installed, a good location will not solve the problem.

The scope of the franchisor’s approval must be clearly defined: it confirms compatibility with the concept, but does not replace legal, technical or regulatory checks. Nor should it be presented as a guarantee of sales or profitability.

2. Review the legal framework and applicable permits

Guatemala has no dedicated, comprehensive franchise law or general mandatory pre-contractual disclosure regime specifically for franchises. A franchise agreement is treated as an atypical commercial contract: it is governed by the Commercial Code, Decree 2-70, with the Civil Code, Decree-Law 106, applying on a supplementary basis.

The Industrial Property Law, Decree 57-2000, regulates matters such as trade marks and licences to use them. It does not impose a general requirement to register the business model or franchise as a condition of operating. This is separate from business registration, tax requirements and approvals for the premises.

Check with the relevant municipality which approvals are required for the premises’ location, intended activity and proposed building work. Depending on the business, health, environmental or other regulatory requirements may also apply. Do not assume that permits for the original outlet cover a new address.

The Consumer and User Protection Law, Decree 6-2003, is also relevant to dealings with the public. With local advice, prepare a checklist of applicable requirements and distinguish between those that fall to the property owner, the tenant and the business operator.

3. Align the lease with the franchise agreement

The most common risk is taking on rent obligations before knowing whether the premises can be used. Before paying money upfront or signing binding documents, have the lease and its accompanying documents reviewed, including any building or shopping centre rules.

Pay particular attention to these points:

• Permitted use: this must cover the actual business activity, rather than an overly narrow description that excludes complementary services.
• Building work and signage: identify which alterations require consent and who retains the improvements when the lease ends.
• Terms: compare the length of the lease with the franchise term and the expected investment payback period.
• Renewal: do not confuse an opportunity to negotiate with a contractual right to renew.
• Assignment and occupation: check whether a change of operator or the franchisor stepping in would require the landlord’s consent.

Where negotiable, consider making commitments conditional on approval of the premises, technical feasibility or obtaining permits. Specify the deadline, the evidence required and what happens to deposits if those conditions are not met. These protections must be expressly agreed; they do not apply automatically.

4. Establish a documented authorisation to open

Include a procedure in the franchise agreement for proposing, reviewing and approving locations. It should state who submits documents, who responds, within what timeframe and what happens if the premises are rejected.

Separate initial approval of the premises from final authorisation to open. Building work, permits or utility connections may still be outstanding between these stages. This prevents a favourable email about the location from being interpreted as permission to start serving customers.

Maintain a shared file containing the signed lease, the property owner’s consents, approved plans where applicable, required permits and a list of outstanding items. Assign each outstanding item to a named person and set a deadline for resolving it.

Before announcing the opening, confirm that there are no legal or safety obstacles. If minor branding details remain outstanding, document how they will be corrected without confusing them with essential operating requirements.

Practical conclusion: before committing to a new location, require three checks: compatibility with the concept, legal and technical feasibility, and a lease aligned with the franchise agreement. Commercial approval of premises does not mean they are ready to open.