Franchising in Mexico: what happens to your assets when you exit

Before buying a franchise in Mexico, it is worth understanding what will happen to your equipment, furniture and fittings when the relationship ends. Paying for them does not guarantee that you can keep them or sell them freely if you agree to certain contractual obligations. In franchising, clearly defined exit terms protect your investment and reduce disputes. Review these terms before signing, not when you already need to close.

1. Distinguish your assets from the right to use the brand

Buying a franchise does not mean acquiring the brand. You may own ovens, refrigerators, counters or computers, while your right to use the brand’s distinctive signs depends on the licence and the agreement. Once that permission ends, keeping the equipment does not entitle you to continue presenting the business as part of the same network.

Prepare an asset inventory identifying:

• Owner: you, your company, the franchisor, a supplier or a leasing company.
• Supporting documentation: an invoice, lease, loan-for-use agreement or other document establishing ownership or rights of use.
• Restrictions: outstanding finance, security interests or conditions on transferring the asset.
• Brand elements: signs, finishes or components that must be removed or altered.

List improvements incorporated into the premises separately. A specialist electrical installation or a fixed counter may have operational value, but whether it can be removed will depend on the lease and the nature of the installation. Do not assume that every investment can be recovered through a sale.

2. Understand what Mexican law requires

Mexico has specific franchise rules under the Federal Law on the Protection of Industrial Property (LFPPI). Article 246 requires the agreement to be in writing and to include, among other things, the grounds for termination.

Sections XI and XII are particularly relevant to what happens to your assets: there is no obligation to sell assets to the franchisor or its nominee when the agreement ends, nor to sell or transfer shares in the franchisee company or make the franchisor a shareholder, unless otherwise agreed.

The practical consequence is important: the law does not impose these sales by default, but it allows the parties to agree to them. A clause that looks like a routine part of closing down could become an obligation to transfer assets or shareholdings.

Ask a lawyer to identify whether the document contains a compulsory sale provision, a purchase option or a right of first refusal. These are not equivalent: an option gives its holder the choice of whether to buy; an obligation may require the transaction to go ahead; and a right of first refusal gives priority over third parties on the agreed terms.

3. Negotiate the price, scope and payment terms before committing

If you accept an asset purchase clause, it is not enough to state that the franchisor may buy the assets ‘at their value’. That wording needs a verifiable valuation method.

Clarify these points in writing:

• Assets covered: identify categories and exclusions, particularly assets owned by others or subject to finance.
• Triggering circumstances: distinguish between expiry, early termination and other reasons for leaving.
• Valuation: specify whether the price will be based on an independent valuation, a formula or an agreed amount.
• Disagreements: establish how the valuer will be appointed and who will pay their fees.
• Deadlines: set dates for exercising the option, completing the sale and paying the price.
• Handover: determine who will cover dismantling, transport, taxes and damage to the premises.

Book value does not necessarily reflect resale value. Depreciated equipment may still be useful, while an expensive installation may have little value outside the premises. Ask your accountant to calculate the net proceeds after debts and removal costs.

Also review any right to deduct alleged outstanding amounts from the price. Agree how these amounts will be documented and how disputed sums will be handled, rather than accepting deductions without a clear procedure.

4. Plan an exit that does not depend on an uncertain purchase

An option granted to the franchisor is not a promise that you will recover your investment. If the franchisor decides not to exercise it, you will need an alternative that complies with your contractual obligations.

Before buying, ask for clear terms covering the deadline for removing assets, access to the premises and the work needed to remove the branding. Check that this timetable fits with the deadline for handing the premises back to the landlord.

If a transfer of shares is possible, insist on a separate review: selling the company is not the same as selling its equipment. Its debts and obligations must be examined, along with any personal guarantees that could remain in force.

Practical takeaway: before signing, make sure four questions are answered: what you can keep, what you could be required to sell, how the price will be calculated and when you will be paid. A clear exit starts when you buy.