Buying a franchise in Mexico: check who is selling it to you

A familiar brand is not enough to identify the business you will be contracting with. Different companies within a franchise network may handle sales, contracts and services. Before buying a franchise in Mexico, check who will owe obligations to you and whether the person signing has authority to do so. This check does not replace an assessment of the brand: it answers a different question — who will be your legal counterparty?

1. Identify the business behind the offer

Start by asking for the franchisor’s full name or registered company name, address and Mexican federal taxpayer registration number (Registro Federal de Contribuyentes, or RFC). Do not rely solely on the trading name shown in the sales presentation.

Then check that identity against the documents you receive:

• Sales proposal and quotations.
• Pre-contractual information, commonly known as the Circular de Oferta de Franquicia, or COF.
• Draft agreement and its schedules.
• Payment instructions.
• Tax documentation relevant to the transaction.

Discrepancies do not, in themselves, prove that anything is wrong, but they require a documented explanation. For example, one company may market the franchise while another grants it. You need to know which company will be obliged to fulfil its commitments to you and why each is involved.

If the seller uses phrases such as ‘we are part of the same group’, ask them to identify the companies involved. Sharing offices, shareholders or branding does not automatically make every company liable for another’s obligations.

2. Check legal existence and authority to act

If the franchisor is a company, ask for its incorporation document and, where applicable, any relevant amendments. Instruct a lawyer to review its current registered name, corporate objects, management structure and registration details in Mexico’s Public Registry of Commerce (Registro Público de Comercio). Checking the register helps corroborate documents; it does not certify the franchise’s profitability or quality.

Also ask for documentary evidence of the signatory’s authority. They may be a director or an authorised representative, but a job title on a business card does not prove that they can legally bind the company.

At a minimum, the professional review should answer these questions:

• Is the person signing on behalf of the company named in the agreement?
• Does their authority cover this transaction?
• Are there any limits, internal approvals or joint-signature requirements that must be observed?
• Are there relevant corporate changes that need to be documented?

Not all franchises are granted by companies. If you are contracting with an individual, different documentation will be needed: their identity must be verified and, if they act through a representative, that representative’s authority must also be checked. Do not mistake a simple structure for a lack of legitimacy, or a complex structure for greater security.

3. Understand how these checks fit into Mexican law

Mexico has specific franchise regulations. Article 245 of the Federal Law for the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) requires anyone granting a franchise to provide information about the state of their business at least thirty days before the agreement is entered into.

The Regulations under the Industrial Property Law (Reglamento de la Ley de la Propiedad Industrial) specify that this information must include the franchisor’s name or registered company name, address and nationality. These details provide a starting point for checking the identity of your future counterparty.

Article 246 of the law requires franchise agreements to be in writing and sets out their minimum content. The General Law on Commercial Companies (Ley General de Sociedades Mercantiles) and other applicable commercial provisions are also relevant when reviewing a company’s incorporation and the authority of its representatives.

Distinguish between information that must be provided by law and additional due diligence documents. Requesting corporate documents and powers of attorney for review is a prudent step; it does not mean that all of them must necessarily form part of the COF. Nor does the provision of pre-contractual information amount to government approval of the investment.

4. Establish who receives payment and who is responsible

Before transferring money, check the bank account beneficiary against the counterparty you have identified. If you are told to pay another person or company, request formal instructions and review with your adviser the basis on which they are collecting the money and how your payment will be acknowledged.

Also clarify who will provide the promised services. If another company will carry out certain tasks, the agreement should make clear which obligations remain with the franchisor. Avoid arrangements in which each party can shift responsibility to another if commitments are not met.

Keep a file of dated documents, explanations and final versions. If the contracting company changes before you sign, review the transaction again: do not treat it as a mere administrative correction.

Practical conclusion: do not sign or pay until you can identify unambiguously who you are contracting with, who has authority to represent them and who will be responsible for delivering what has been promised.