Franchise disclosure in Mexico: how to review the COF before signing

Mexico’s franchise disclosure document, known as the Circular de Oferta de Franquicia (COF), helps you assess a brand before committing your investment. It neither replaces the contract nor guarantees profitability: it tells you who is offering the business and on what terms. If you are considering entering Mexico’s franchise market, treat it as a due diligence file, not a sales brochure.

1. Understand what the law requires and when you must receive it

Mexico has specific franchise regulations. Article 245 of the Federal Law on the Protection of Industrial Property (LFPPI) requires franchisors to provide prospective franchisees with information on the state of their business at least thirty days before entering into the contract.

This information is commonly known as the COF. Article 65 of the Regulations under the Industrial Property Law, which applies insofar as it does not conflict with the LFPPI, sets out the minimum content. This includes the franchisor’s identity, a description of the business and how long it has been operating, intellectual property, payments, technical assistance, and the prospective franchisee’s rights and obligations, among other matters.

Do not confuse this period with a promise to refund advance payments. The provision refers to the date the contract is entered into; the terms of any reservation payment or deposit need to be reviewed separately. Before paying, ask for written confirmation of when a refund is available and what deductions might apply.

Keep the delivery email, the file you receive and its annexes. Any acknowledgement must show the actual date of receipt: do not sign a backdated acknowledgement to speed up the process.

2. Check who is offering the franchise and what rights they can grant

Start by checking that the company’s legal name in the COF matches the name in the draft contract and the entity that will receive your payments. If different companies appear, request documentary evidence explaining each one’s role.

Ask for documents that allow you to verify the company’s legal existence and the authority of the person who will sign. A brand’s trading history does not, by itself, prove that its representative is authorised to bind the company.

For intellectual property, identify the trade marks involved and check their status with the Mexican Institute of Industrial Property (IMPI). Verify ownership, whether the registrations remain in force, and the goods or services they cover. If the franchisor is not the owner, request evidence of its authority to grant the rights being offered.

Also distinguish between how long the brand has existed, how long the contracting company has existed, and its experience of operating a franchise network. These are different facts. A business may have spent years selling to the public but only recently begun supporting franchisees.

3. Turn payments and support into verifiable details

The COF must disclose the amounts and types of payments payable to the franchisor. To assess them, draw up a table with these columns: payment type, amount or calculation formula, taxes, due date and terms for adjustments.

Pay particular attention to:

• Initial fee: what it includes and what is quoted separately.
• Royalties: which revenue they are calculated on and whether minimum payments apply.
• Advertising: compulsory contributions and additional local expenditure.
• Systems and services: software licences, maintenance and support.
• Training: participants, duration, location and travel expenses.

The total investment may include payments to third parties that do not appear in the list of fees payable to the franchisor. Request a separate budget for fit-out, equipment, stock, permits and working capital. Do not assume the initial fee covers everything.

For support, replace vague wording with specific questions: who will help with the opening, for how long, and what support will be available afterwards? If a service is central to your decision to buy, it should be clearly documented in the contract or its annexes.

4. Separate mandatory disclosures from additional evidence

Receiving a COF does not mean that business forecasts have been verified. Nor should the minimum regulatory content be confused with a general obligation to provide audited financial statements or guarantee profits.

As part of further due diligence, request evidence supporting any estimates: the period analysed, the number of outlets considered, differences between company-owned and franchised outlets, and the expenses included. If a payback period is presented, ask whether it accounts for taxes, debt, the owner’s remuneration and equipment replacement.

Ask to speak to current franchisees and, where possible, those who have left the network. Their accounts do not replace documentary evidence, but they can help you cross-check opening timescales and the quality of support.

5. Resolve discrepancies before deciding

Compare the COF with the draft contract, which must be in writing and meet the minimum content requirements of Article 246 of the LFPPI. Record each discrepancy, its impact and the response received. Do not agree to leave contradictions about payments or essential services unresolved until later.

Untruthful information may give grounds for seeking annulment and damages under Article 245, subject to conditions and time limits. This does not mean an automatic refund: you will need specific legal advice.

Practical conclusion: do not proceed simply because you have received the COF. Proceed when you can verify who you are contracting with, how much you will pay and what support you will receive, with any discrepancies resolved in writing.