Selling a Franchisor Company in Guatemala: What to Agree

If you plan to franchise your business in Guatemala, it is worth anticipating what would happen if you later sold the company or transferred the contracts to another entity. You do not need a buyer lined up: you need to ensure that a future transaction does not leave anyone without responsibility for the support you have promised. Within a franchise network, establishing these rules from the outset helps protect trust and provides a framework for any future negotiations.

1. Distinguish what would be sold and what would change

“Selling the business” can describe several different transactions. Before drafting a clause, ask your adviser to distinguish at least between the following situations:

• Share sale: ownership of the company changes, but the entity that signed the contracts may remain the same.
• Transfer of contracts: another person or company takes over the franchisor’s contractual position, subject to the applicable requirements and agreements.
• Sale of the brand or other assets: ownership of resources needed to fulfil the contract changes, without necessarily transferring the support obligations.

This distinction matters because permission to sell assets does not, in itself, settle the transfer of obligations. Nor should you assume that every change in shareholders amounts to replacing the franchisor.

Prepare an internal table setting out each possible transaction, the rights affected, the services promised and the decisions that would require legal review. The aim is to describe specific situations, not to secure blanket permission for any change.

2. Draft the rules within Guatemala’s legal framework

Guatemala has neither a comprehensive franchise-specific law nor a mandatory pre-contractual disclosure regime specifically for franchises. A franchise agreement is treated as an atypical commercial contract, governed by the Commercial Code, Decree 2-70, with the Civil Code, Decree-Law 106, applying on a supplementary basis.

Article 669 of the Commercial Code sets out the principles of verdad sabida (known truth) and good faith in the interpretation and performance of commercial obligations. Article 280 also excludes commercial franchises from the provisions of the chapter on agents, distributors and representatives. The protections afforded to those other relationships should not automatically be applied to a franchise.

The Industrial Property Law, Decree 57-2000, is also relevant: it requires trade mark licences to be in writing and includes provisions applicable to franchises. However, securing the right to use the trade mark does not establish who will provide training or fulfil outstanding commitments.

Arrange for the transfer, change-of-control and licence clauses to be reviewed together. The contract should specify when notice, consent or documented assumption of obligations is required, without presenting a commercial preference as a legal requirement.

3. Set conditions for the party taking over

It is not enough to identify who will collect royalties after the transaction. Before offering your first franchise, define what another entity must demonstrate if it takes over the relationship.

The contract should cover:

• Written notice: which changes must be communicated, through which channel and how far in advance, where possible.
• Identification of the successor: its legal name, authorised representatives, contact details and payment information.
• Assumption of commitments: how responsibility for training, assistance and other agreed services will be documented.
• Sufficient rights: evidence that the successor will be able to authorise use of the trade mark and access the necessary resources.
• Financial terms: clarification that the change does not, in itself, permit new fees or unilateral amendments.

If you agree that the franchisee’s prior consent is required, or that certain detrimental changes will give the franchisee a right to exit, define the circumstances, procedure and consequences. Phrases such as “suitable new owner” are too vague without verifiable criteria.

4. Put your commitments in order before negotiating a sale

Keep an up-to-date file for each franchisee containing the contract, schedules, approved exceptions, prepaid services, balances and outstanding claims. This record makes it possible to establish what a buyer would actually need to take on.

For example, if you have charged for training that has not yet been delivered, the sale should not leave the franchisee arguing over who must provide it. Document how that commitment will be fulfilled and who will be responsible, in accordance with the agreements and applicable law.

Before completing a transaction, cross-check three documents: the franchise agreement, the sale or transfer agreement, and the communication to the franchisee. They should be consistent about responsibilities, dates and terms. A notice does not replace consent where consent is required, nor does it alter the agreed terms on its own.

Practical takeaway: before bringing franchisees on board, establish what can be transferred, how it will be communicated and who will be responsible for each obligation. Clear rules for a future sale should be in place from the very first contract.