Reserving a franchise in Guatemala: how to accept deposits

When you start franchising a business in Guatemala, a prospective franchisee may offer money to secure the opportunity while reviewing the documentation. Accepting it without clear terms can create conflicting expectations: you understand that an assessment is beginning; they believe they can already open for business. In a franchise community built on good faith, a reservation should have a limited, documented purpose, not replace the final agreement.

1. Decide whether you need a reservation

Before taking payment, identify the specific commitment you will make. If you cannot yet explain what the prospective franchisee will receive, it is better to continue the assessment without accepting money. A deposit alone does not demonstrate that someone is ready to run a franchise.

A reservation can serve to pause discussions with other interested parties about a defined opportunity while both sides complete their checks. It can also provide structure for a process involving specific tasks, provided these are described and their costs are distinguished from the reservation funds.

Do not confuse three different concepts:

• Reservation: a temporary commitment whose scope must be expressly defined.
• Advance payment towards the initial franchise fee: a payment credited towards that fee if the franchise agreement is signed, on the agreed terms.
• Payment for preliminary services: remuneration for specified work, such as a technical assessment, if both parties agree to commission it.

The document’s title alone does not determine its legal effect. What matters is the obligations undertaken. If you call an agreement a ‘reservation’ but it already grants operating rights, you need to review its true nature with a local legal adviser.

2. Place the agreement within Guatemala’s legal framework

Guatemala has no franchise-specific law. A franchise agreement is regarded as an atypical commercial contract: its terms are shaped by freedom of contract, within the limits of applicable law.

The general framework comprises the Commercial Code, Decree 2-70, supplemented by the Civil Code, Decree-Law 106. The commercial principles of good faith and truth as understood by the parties (verdad sabida) are relevant when documenting what is actually offered and accepted. The Industrial Property Law, Decree 57-2000, governs trade marks and licences to use them, among other matters.

There is no specific statutory pre-contractual disclosure period for franchises equivalent to those established in some other countries. Do not present a thirty-day waiting period as a Guatemalan legal requirement. You may agree a reasonable review period, but you must identify it as a voluntary condition of the process.

The QFA code of conduct promotes good faith and clarity of obligations. It is an association standard, not national law; membership of an association is voluntary. Nor does a reservation replace the authorisations or contracts needed to operate.

3. Document how the money will be used and refunded

Prepare a written agreement before receiving payment. It should identify the parties, the opportunity being reserved, the expiry date and the outstanding steps. Avoid wording such as ‘reservation of Guatemala’ if you are only assessing a particular outlet.

Cover at least the following points:

• Amount and recipient: who receives the money and through which traceable payment method.
• Subsequent allocation: whether it will be deducted from the initial franchise fee and how this will be recorded.
• Temporary commitment: which discussions will be paused and until when, if applicable.
• Outstanding conditions: which checks must be completed before deciding whether to sign.
• Refund or retention: the circumstances in which each applies and how the amount is calculated.
• Refund deadline: when and by which method the funds will be returned.

Distinguish between withdrawal by the prospective franchisee, rejection by the franchisor and failure to meet a necessary condition, such as approval of the premises. These need not lead to the same outcome, but that outcome must be clear before payment.

Avoid routinely declaring the entire amount ‘non-refundable’. If you propose deducting charges for work completed, identify in advance what that work is, how it will be authorised and what evidence will substantiate it. Have these terms reviewed by a legal adviser and coordinate with your accountant on the documentation and tax treatment of the payment.

4. Manage the reservation period and bring it to a clear conclusion

Appoint someone to record the payment, retain the agreement and monitor its expiry. Keep a shared checklist of outstanding items with the prospective franchisee so that neither party mistakes silence for approval.

Make clear that the reservation alone does not authorise the prospective franchisee to use the trade mark, announce an opening, present themselves as a franchisee or operate the business. If you need to permit a limited activity, document it separately and review its implications.

At the end of the period, record one of three outcomes in writing: signing the franchise agreement and crediting the advance payment; an agreed extension; or closure with the appropriate financial settlement. Do not extend a reservation indefinitely or retain money without explaining the basis for doing so.

In practice: before accepting a deposit, make sure you can explain in writing what you are reserving, until when, and what will happen to the money if the franchise agreement is not signed.