Franchise disputes: what to agree before buying in Mexico

Buying a franchise also means deciding how you will resolve disagreements with the franchisor. A strong franchise relationship needs clear procedures for raising claims and finding solutions. Before signing, review the clauses on notices, negotiation, mediation, arbitration and court proceedings: they can determine whether enforcing your rights will be practical or prohibitively expensive.

1. Distinguish your legal rights from the agreed procedure

Mexico has specific franchise legislation. Article 245 of the Federal Law for the Protection of Industrial Property (LFPPI) requires franchisors to provide information about the state of their business at least thirty days before the contract is entered into. This information is usually supplied through the franchise disclosure document, known locally as the Circular de Oferta de Franquicia, or COF.

Article 246 requires the contract to be in writing and sets out its minimum contents, including the grounds for termination and the conditions for reviewing and, where appropriate, amending its terms by mutual agreement. The Commercial Code and applicable civil law provisions are also relevant to disputes.

However, these rules do not mean that every disagreement is automatically dealt with by the Mexican Institute of Industrial Property. A dispute over payments or support may need to follow a contractual procedure, court proceedings or arbitration; an industrial property infringement may fall under a different authority and procedure.

Ask your lawyer to distinguish three issues: what rights you have, where you can enforce them and what deadlines you must meet. Commercial discussions with the franchisor do not necessarily suspend the legal time limits for bringing a claim.

2. Set up a claims procedure you can actually use

A clause stating only that “the parties will resolve their differences amicably” offers little guidance. It is better to establish a clear sequence, with named responsibilities and defined time frames, without creating an endless chain of approvals.

Check that the contract clearly identifies:

• Notice channel: the postal address, authorised email address or platform to use, and how receipt will be proved.
• Contents of the claim: the facts, the obligation allegedly breached, supporting documents and the remedy sought.
• Responsible person: who must respond and who has authority to approve a solution.
• Response deadline: when the waiting period ends and you can move to the next stage.
• Opportunity to remedy a breach: which breaches can be put right and how this will be verified.

For example, if a tool essential to running the business fails, simply opening a support ticket is not enough. It should be clear when that ticket becomes a contractual claim and what happens while the problem remains unresolved.

Look for mutual obligations: if you must respond to formal requests, the franchisor should also have a defined procedure for responding to yours. Avoid accepting mechanisms where progress depends entirely on the other party’s willingness to act.

3. Compare courts, mediation and arbitration by their real cost

No single route is best in every case. The choice depends on the type of dispute, where the parties are based, the amount at stake and the complexity of the contract.

Courts. Review the agreed jurisdiction and the applicable rules for determining which court has authority to hear the dispute. Litigation far from your business may add legal representation and travel costs. Do not assume that every choice-of-court clause will be valid: ask your lawyer to check it against the applicable jurisdiction rules.

Mediation. This can help the parties reach an agreement with support from a neutral person, but it does not guarantee a solution. Specify how the mediator will be chosen, who will pay and how long the attempt will last. The formal requirements for the resulting agreement and its enforceability should be checked under the applicable legal framework.

Arbitration. The Commercial Code governs commercial arbitration. If you agree to it, identify the administering institution, its rules, the seat of arbitration, the language and the number of arbitrators. Request an estimate of fees and administrative costs for a comparable dispute. The award can be binding and judicial review is limited; do not treat arbitration as an initial hearing followed by an ordinary appeal.

Also ask whether urgent measures can be sought from the competent authority before completing negotiations. An amicable settlement stage should not prevent you from seeking urgent protection where the law allows it.

4. Prepare your evidence before you need it

Even the best clause is of little use if you cannot prove what happened. Before buying, confirm that you will have access to the reports, receipts, communications and records needed to document both parties’ compliance with their obligations.

Keep the signed contract, its annexes, the agreed versions of operational documents and acknowledgements of receipt for notices. After an important call, send a written summary and ask for confirmation. Protect confidential information and personal data when sharing case files with advisers.

Do not automatically stop payments or cease meeting your obligations in response to a disagreement: you could put yourself in breach. First seek advice on the remedies available under the contract and the law.

Practical takeaway: before signing, work through a specific claim with your lawyer. If you cannot explain whom you would notify, how long you would wait, where you would bring the claim and what it would cost, there is still a clause that needs clarifying.