Buying an Existing Franchise in Mexico: What to Check

Buying an operating franchise lets you assess a real business, but it also means examining its history. The price may include equipment, stock and an established customer base without guaranteeing the right to keep using the brand. In Mexico’s franchise market, a business transfer should be assessed as a purchase with several legal and financial components, not simply a handover of the keys.

1. Define exactly what you are buying

The Spanish term traspaso, commonly used for a business transfer, does not in itself identify a particular legal transaction. Before negotiating the price, ask the seller to specify which of these structures they are proposing:

• Asset purchase: you acquire specified assets, such as furniture, equipment and stock. Contracts and permits need to be reviewed separately.
• Purchase of shares or ownership interests: you acquire a stake in the company operating the business. That company retains its obligations, including any that have yet to be identified.
• Assignment of contractual rights: the intention is to transfer the franchisee’s position under the agreement, subject to its terms and the necessary approvals.

These structures can be combined. Buying the ovens, counters or computers does not automatically make you a franchisee, nor does it guarantee that the lease will continue.

Prepare a schedule of what is included and excluded: assets, deposits, receivables, customer advance payments, contracts and outstanding obligations. Request documents proving ownership of the equipment and check whether any items are leased, financed or subject to security interests.

2. Confirm with the franchisor that you can continue operating

Review the current agreement and its schedules before accepting the seller’s terms. Identify restrictions on assignment, buyer approval requirements, transfer fees and any obligations relating to training or upgrading the premises.

Obtain written confirmation from the franchisor of the proposed route: assignment of the existing agreement or entry into a new one. It must be clear how long you will be able to operate and on what terms. Do not value the business on the assumption of a renewal that no one has committed to.

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 prospective franchisees to receive information about the state of the franchisor’s business at least thirty days before entering into the agreement. Article 65 of the Regulations under the Industrial Property Law sets out the required content of this information, commonly known as the Circular de Oferta de Franquicia, or COF, a franchise disclosure document.

If you will be entering into a new agreement, factor that disclosure and the required waiting period into your purchase timetable. If an assignment is proposed, ask your lawyer to determine how it will be documented and which disclosure obligations apply; do not assume that the seller’s paperwork replaces your own due diligence.

Article 246 requires a written agreement with specified minimum content. Commercial approval of your application does not replace that document or the formal completion of any relevant assignment.

3. Review the outlet’s debts and commitments

Request documents relating to the specific outlet, not just brand-wide figures. Cross-check tax returns, sales records, bank statements and supporting documents for expenses. Any discrepancies should be explained and supported by evidence before completion.

Organise your review into four areas:

• Franchisor and suppliers: request statements of account, written confirmation of no outstanding balances, and details of disputes, outstanding credits or rebates, and notified breaches.
• Premises and utilities: check rent, maintenance charges, deposits and bills. Confirm with the landlord whether the existing lease can continue or a new agreement is required.
• Staff: review employment contracts, length of service, wages, outstanding employee benefits and compliance with the Mexican Social Security Institute (IMSS). Do not assume that a change of owner removes employment rights.
• Customers: identify advance payments, memberships, gift cards, warranties and services that have been paid for but not yet provided.

Alongside franchise rules, the Commercial Code and company, employment, tax and social security legislation may apply. An asset purchase does not, by itself, rule out legal liabilities: potential employer succession and other consequences require professional assessment based on the transaction.

Classify each finding as an obligation the seller will settle, a commitment you will expressly assume, or a condition that must be resolved before you buy.

4. Make payment conditional on a verifiable completion process

Negotiate a purchase agreement that coordinates the business handover with the necessary approvals. Completion conditions may include franchisor approval, formal execution of the relevant agreement, securing continued use of the premises and settlement of identified debts.

Also define how the price will be adjusted if the final stock count differs from what was advertised or equipment is missing. Where potential liabilities exist, discuss with your advisers whether to retain part of the purchase price and include clearly defined indemnity obligations. These contractual protections do not prevent third parties from exercising their statutory rights.

On the handover date, sign a handover record covering the physical inventory, equipment condition, utility meter readings, keys and documents received. Separately verify whether permits and access to operational systems can continue; not all are transferable.

Practical conclusion: buy only when you can demonstrate what you will receive, what authorisation you will have to operate and how previous obligations will be dealt with. A business that is open and trading is not necessarily a franchise ready to change hands.