Buying a Franchise in Mexico: What to Check If You Pay in US Dollars

A franchise may quote its investment costs in US dollars even though its customers pay in Mexican pesos. That difference matters: the actual amount you pay can change between receiving a quote, signing the contract and each payment falling due. Before joining a franchise network, check how payments are converted and who bears the exchange rate risk. Asking how much it costs is not enough; you need to know how much money will leave your account and under what terms.

1. Identify which obligations depend on the US dollar

Ask for a breakdown distinguishing the currency in which each price is quoted from the currency in which it must be paid. They are not necessarily the same: a fee may be denominated in US dollars but payable in its peso equivalent.

Place each payment obligation in one of these categories:

• Fixed price in pesos: unaffected by movements in the US dollar, unless an adjustment clause applies.
• US dollar price payable in pesos: requires a conversion rule.
• Transfer in US dollars: requires clarification of the destination account, fees and legal conditions governing payment.
• Price subject to a later quotation: the final amount payable cannot yet be determined.

Include both payments to the franchisor and payments to third parties that are necessary to operate the business. Separate the initial fee, recurring services and any obligations linked to foreign currency.

Also ask how long the offer remains valid. A commercial quotation with an expiry date is not a commitment to hold the price until the business opens.

2. Check the conversion rule, not just the currency

Phrases such as “at the prevailing exchange rate” leave important questions unanswered. Prevailing where, at what time and on which date? The rate displayed by a financial institution may differ from the rate applied when buying foreign currency or making a transfer.

Ask for the proposal and contract to specify:

• The reference source for the exchange rate.
• The date used to determine the conversion: the invoice date, payment due date or actual payment date.
• What happens on days when the reference rate is not published.
• The rounding rules and fees applicable to each party.
• The procedure for correcting discrepancies in calculations.

In Mexico, you must also consider the Monetary Law of the United Mexican States (Ley Monetaria de los Estados Unidos Mexicanos). Article 8 establishes, as a general rule, that foreign-currency obligations entered into inside or outside the country and payable in Mexico are settled by paying the equivalent in Mexican currency at the exchange rate prevailing at the place and date of payment.

How this applies in practice requires a review of the place where the obligation must be fulfilled and the applicable legal provisions. If you are required to transfer money abroad or waive your right to pay in pesos, seek specific legal advice: a commercial clause does not, by itself, override the law.

3. Assess the impact on your budget

Build a spreadsheet with one row for each payment obligation. Record the amount, currency, due date, conversion rule and bank charges. Then calculate the amount payable in pesos under different exchange rate scenarios, without treating them as forecasts.

For a fixed amount in US dollars, the basic calculation is:

Estimated payment in pesos = amount in US dollars × applicable exchange rate + relevant charges.

Add any applicable taxes separately, with advice from an accountant. This will help you avoid confusing an exchange rate movement with a tax charge or bank fee.

If a recurring fee is calculated on sales in pesos but invoiced in US dollars, ask for a complete worked example. It should let you trace every conversion and check that no unjustified differences have been added.

Compare the results with the funds available on each payment due date. The aim is not to predict the US dollar exchange rate, but to identify what movement would make it difficult to meet your obligations. If you need to buy foreign currency or arrange a currency hedge, first ask about the costs, terms and risks; do not treat it as an automatic solution.

4. Get the terms in writing

The Federal Law for the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) specifically regulates franchises in Mexico. Article 246 requires a written contract. Its minimum required content includes the policies, procedures and timeframes relating to reimbursements, financing and other payments due from the parties.

This legal framework makes it particularly important that currency and payment terms are not left solely in sales communications. Compare the amounts and payment items disclosed before signing with the contractual obligations, and ask for any differences to be clarified.

Also negotiate how any refund would be calculated: returning a nominal amount in pesos does not necessarily restore the value originally expressed in US dollars. The formula, timeframes and charges should be clearly defined, without assuming that a refund is automatically available.

Practical takeaway: before buying, insist on a payment schedule that someone else can independently recalculate. If the final amount depends on an undefined reference rate or a unilateral decision, an essential term still needs clarification.