Remedial action plans for franchises in Guatemala

Before franchising your business in Guatemala, decide what will happen when an outlet fails to meet an operational standard. Identifying a deviation is not enough: you need a procedure for communicating it, correcting it and checking the outcome. A remedial action plan helps protect customers and ensure consistent treatment across the franchise network, without turning every mistake into a threat of termination.

1. Define the legal and contractual framework

Guatemala has no specific franchise law. A franchise agreement is treated as a commercial contract without a specifically regulated legal form, 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, is relevant to the trade mark and other protected rights used in the business.

The absence of specific legislation does not mean that any corrective measure is valid. The procedure must comply with applicable law, the principle of good faith and the agreed obligations. A Guatemalan lawyer should review how notices, periods for remedying breaches and the consequences set out in the agreement fit together.

The QFA Code of Conduct for Guatemala states that franchisees must be notified in writing of any contractual breach and given a reasonable period to remedy it. This is an association commitment, not national law; membership of a franchise association is voluntary.

Do not present an internal deadline as though it were a general legal requirement. The appropriate timeframe will depend on the problem, the agreement and the applicable rules. A situation that puts safety at risk may require immediate action rather than waiting for the standard remedial timetable.

2. Distinguish breaches from recommendations

Before preparing a notice, identify the specific obligation that has not been met. Failing to follow a mandatory procedure is not the same as declining a suggestion for improvement.

Classify each finding according to its nature:

• Documented breach: there is an identifiable obligation and evidence that it has not been met.
• Uncertainty over interpretation: the agreement or manual does not explain sufficiently what should have been done.
• Opportunity for improvement: the outlet is compliant but could operate more efficiently.

Only the first category should be treated directly as a breach. In the second, clarify the requirement and review the documentation before assigning responsibility. In the third, make a recommendation rather than imposing a sanction.

For example, if a cleaning record required by the manual is missing, describe which record is missing and the period it covers. Its absence does not, by itself, prove that cleaning never took place. Distinguishing the observed fact from its possible causes avoids overstated accusations and makes a constructive response easier.

Also check that the franchisee received the applicable version of the procedure and the promised training. If the franchisor did not provide the agreed instructions or support, that shortcoming must be addressed alongside the operational problem.

3. Draw up a workable plan

The notice should explain the problem precisely and give the franchisee an opportunity to provide information. Avoid general statements such as ‘the outlet is performing poorly’ or ‘immediate improvement is required’.

Use a remedial action form containing the following elements:

• Observed facts: date, location and an objective description.
• Applicable obligation: the relevant clause or section of the manual.
• Evidence: records, photographs or other relevant documents.
• Required action: the specific outcome to be achieved.
• Person responsible: who will carry out each task.
• Franchisor support: the explanation, training or assistance to be provided.
• Deadline: the completion date and, where appropriate, interim milestones.
• Verification: how the correction will be checked and documented.

For the cleaning record, the plan could include explaining how to use it, assigning responsibility and checking that it is completed correctly over a defined period. It should not require past records to be reconstructed as though they had been completed at the time.

The deadline should reflect the practical difficulty of resolving the issue. Correcting a displayed instruction is not the same as repairing a piece of equipment. Document any adjustments and the reasons for them, without introducing penalties that have not been validly agreed.

4. Verify completion and learn from recurring problems

Receiving a response does not mean the case can be closed. Review the evidence using the method specified in the plan and confirm in writing whether the remedial action has been accepted, remains outstanding or is incomplete.

If the problem recurs, analyse the cause before repeating the same demand. There may be a training gap, an ambiguous instruction or a task that cannot be carried out with the resources allocated to the outlet. When several outlets show the same deviation, review the design of the system as well.

Keep a case file containing the notice, the response, the support provided and the closure record. Apply consistent criteria to comparable situations and explain any differences in treatment.

Practical conclusion: before offering your first franchise, prepare a remedial action form and test it in your existing business. If you cannot explain what needs correcting, who will do it and how you will check the outcome, the procedure still needs work.