Franchise premises in Mexico: what to check before signing a lease

Attractive premises are not necessarily suitable for the franchise you want to buy. They may fit the brand’s image yet have restrictions on use, inadequate facilities or lease terms that are incompatible with your business. Choosing the right franchise premises requires three coordinated checks: approval by the franchisor, a technical assessment and a legal review. Complete them before committing to a lease that is difficult to end.

1. Separate brand approval from legal suitability

The franchisor’s approval confirms that the premises meet its commercial and operational criteria; it does not replace official permits or guarantee that you can carry out your intended business activity there.

Mexico has specific franchise legislation. Article 246 of the Federal Law on the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial, or LFPPI) requires the franchise agreement to be in writing and to include, among other things, the location, minimum size and details of investment in the premises’ infrastructure. Verbal approval of a site is therefore not enough to define your commitments.

Ask the franchisor to confirm in writing the approved premises, the business format and any outstanding conditions. If it requires a particular electrical capacity, extraction system, parking provision or usable floor area, request verifiable specifications, not just photographs of a model outlet.

The lease itself must be reviewed under the civil law applicable in the relevant Mexican state. Requirements relating to land use, operating licences, civil protection and, where relevant, health approvals depend on the location and activity. A local lawyer should confirm which apply; there is no franchise permit that replaces these authorisations.

2. Check that the premises can accommodate your business

Before negotiating finishes, establish who is entitled to let you the space. Request documents that verify ownership or the landlord’s authority to let the property and, if a representative will sign, their authority to do so. For a sublease, check that it is authorised and that its term is long enough to support your plans.

Next, combine a document review with a technical site inspection. At a minimum, check:

• Permitted use: whether your specific activity is compatible with the applicable planning rules. An advert describing the property as “commercial premises” is not enough.
• Internal restrictions: shopping centre or jointly owned building rules, opening hours, loading and unloading, noise, waste and signage.
• Utilities and installations: electrical capacity, water, drainage, ventilation and, where relevant, gas or extraction.
• Necessary alterations: whether you may drill into the building, install ductwork, alter façades or place equipment on the roof.
• Physical condition: damp, structural condition, accessibility and evacuation routes, with professional assessment where appropriate.

For example, a restaurant site might be approved by the franchisor but prove unsuitable if the property rules prohibit routing extraction ductwork to the roof. Identifying that restriction before signing avoids investing in a project that cannot go ahead.

Ask for evidence and specific confirmations. The statement “the previous business had a permit” does not establish that the permit is still valid, transferable or covers your activity.

3. Align the lease with the franchise agreement

The two contracts are independent: losing the right to operate under the brand does not automatically end your obligation to pay rent. Likewise, the end of the lease does not, on its own, release you from your commitments to the franchisor.

Prepare a table showing the start dates, expiry dates, renewal provisions and notice deadlines for both contracts. Aim to secure the right to occupy the premises for your intended operating period, without relying solely on renewal at the landlord’s discretion.

With legal advice, negotiate provisions that reduce the risk of committing too early, such as:

• Making certain lease obligations conditional on written approval of the premises and obtaining essential authorisations.
• Setting a deadline for meeting those conditions and specifying what happens to deposits and other payments if they are not met.
• Stating when possession is handed over and when rent becomes payable.
• Expressly authorising the works, signage and uses required for the agreed business format.

These protections are not automatic rights: they must be negotiated and documented. It is also wise to avoid any clause requiring you to comply with all future brand requirements if the landlord retains the power to block the necessary alterations.

4. Calculate the total cost of occupying the premises

Compare properties by their total cost, not just the advertised rent. Include the deposit, guarantees, maintenance charges, applicable taxes, fit-out works, utility connections and repair obligations. Identify which payments are recoverable and which are non-recoverable costs.

Clarify how rent will be adjusted, who pays for structural repairs and who is responsible for defective installations already in place. Record the handover with photographs, an inventory and meter readings to avoid disputes over pre-existing damage.

Finally, obtain a technical cost estimate that reflects both the brand’s specifications and the works the landlord actually permits. If those three elements do not align, you are not yet ready to sign for the premises.

Practical takeaway: before signing a lease, obtain written approval from the franchisor, a satisfactory technical assessment and a legally reviewed lease. A good location is only a sound choice if you can occupy it and run your business there on sustainable terms.