Franchising in Mexico: how to agree time limits for remedying breaches

Before buying a franchise, ask what would happen if an inspection identified a problem or a payment was late. Knowing your obligations is not enough: you need to understand how a breach is established and what opportunity you will have to remedy it. In franchising, a clear procedure helps keep the business running without preventing the brand from acting when serious risks arise.

1. Distinguish a remediable breach from grounds for termination

In Mexico, the Federal Law on the Protection of Industrial Property (LFPPI) specifically regulates franchises. Article 246 requires the agreement to be in writing and to include, among other things, grounds for termination and the criteria, methods and procedures for monitoring, evaluating and rating performance.

This makes it particularly important to read both parts of the agreement together. An operational obligation may seem reasonable but pose a risk if any deviation allows the relationship to be terminated without a defined procedure.

Do not assume there is a universal period for remedying every breach. Ask a lawyer to review the applicable legal rules and, above all, the opportunities to remedy breaches expressly provided for in your agreement. Remedying a breach means putting the failure right and, where appropriate, addressing its consequences.

Ask for breaches to be distinguished by their seriousness and whether they can be remedied. For example:

• A late report can be dealt with by submitting the outstanding information.
• A cleaning deficiency may require immediate action and a follow-up check.
• Disclosure of confidential information may have consequences that persist even after the disclosure stops.

These examples are not automatic legal categories. The classification should reflect the franchise’s activities and be clearly agreed in the contract.

2. Define how you must be notified of a breach

A period for remedying a breach is of little use if no one can establish when it began. Check which notification channels the agreement recognises, who is authorised to receive notices and how receipt is evidenced.

Propose that any notice of breach should identify:

• The specific obligation: the applicable clause, provision or operating standard.
• The findings: what happened, where and when.
• The available evidence: records, photographs, reports or other relevant supporting material.
• The required remedy: the expected outcome and how it will be verified.
• The deadline and consequences: when the period starts and what will happen if the breach is not addressed.

Avoid relying on informal messages from the supervisor. A recommendation for improvement should not be confused with a formal notice that could lead to termination of the agreement.

It is also worth setting out how you can respond if there is an error: for example, if a payment was actually made or a finding relates to another outlet. Submitting an explanation does not necessarily pause the time limit; if you want that option, it must be expressly agreed.

3. Negotiate time limits that genuinely allow you to put things right

Not every problem takes the same amount of time to resolve. Updating a record is not the same as replacing a fixture or system when the work depends on technicians and spare parts. Negotiate time limits linked to the seriousness, urgency and actions required, rather than applying the same formula to every case.

If a complete solution will take longer, you could propose two stages: an immediate measure to contain the risk and a timetable against which the final remedy can be checked. This should be subject to clear conditions, rather than an informal extension.

Also specify:

• Whether periods are measured in calendar days or working days, and how they are calculated.
• When an extension is available and who can authorise it.
• What happens if the remedy depends on the franchisor’s approval.
• How fulfilment of the obligation is documented.

Where health or safety risks arise, it may be necessary to suspend an activity temporarily. Putting a breach right must not mean continuing to operate in dangerous conditions. Distinguish preventive measures from termination of the agreement, and check the legal obligations that apply to the premises.

4. Close out the procedure and check that it works both ways

Ask what document confirms that an issue has been resolved. It is worth agreeing a process for verification and response so that a remedied breach does not remain open indefinitely.

Also check how repeat breaches are defined: whether they involve the same conduct, over what period and with what evidence. Expressions such as “repeated breaches” need to be clarified before signing.

The procedure should also cover breaches by the franchisor. If it fails to provide promised training or a necessary authorisation, you need to know how to formally require it to fulfil its obligations. This does not mean you can unilaterally stop paying royalties or meeting other obligations: the consequences need legal review and must be clearly agreed.

Practical takeaway: before buying, work through a hypothetical remediable breach, covering the notice, time limit, evidence and closure. If you cannot explain each step, ask for the agreement to clarify it before committing your investment.