Initial franchise fees in Mexico: what should they include?

The initial franchise fee is not necessarily the price of a business that is ready to open. Two brands may advertise similar fees but offer very different packages. Before entering the Mexican franchise market, you need to turn that fee into a verifiable list of rights, goods and services. This will help you compare offers without confusing access to the brand with the total investment required.

1. Distinguish the entry fee from the opening package

The initial franchise fee, also known as the entry fee, is usually a one-off payment associated with entering into the franchise agreement. It may cover the right to use the brand and certain initial services, but there is no universal package that every franchise must include for that price.

One offer may include manuals, initial training and support during opening. Another may charge separately for some of these services. Nor should you assume that equipment, stock or marketing materials are included without written confirmation.

Request a breakdown that separates:

• Rights: what authorisation you receive, which outlet it covers and how long it lasts.
• Initial services: specific activities, who is responsible for them and their scope.
• Goods: equipment, furniture or stock, if included in the package.
• Excluded costs: items needed to open that you must arrange or pay for separately.

If the brand uses expressions such as “comprehensive package” or “turnkey”, ask for these to be translated into specific obligations. An appealing sales description alone will not tell you who pays for equipment delivery or installation.

2. Use Mexican regulations to demand clarity

In Mexico, franchises are specifically regulated by the Federal Law on the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial, or LFPPI). Article 245 provides for a written trade mark licence accompanied by the transfer of technical knowledge or technical assistance to ensure consistent operations.

That article also requires the franchisor to provide information about the state of its business at least thirty days before the agreement is signed. This pre-contractual information, usually presented in the Franchise Offering Circular (Circular de Oferta de Franquicia, or COF), must include the amounts and types of payments the franchisee will make, as required by the Regulations under the Industrial Property Law.

Article 246 of the LFPPI, meanwhile, requires a written agreement containing certain minimum provisions. These include the policies, procedures and timeframes relating to refunds, financing and other payments agreed between the parties.

These rules do not set an official fee or guarantee that it includes everything needed to open. Their value to a buyer lies in requiring documented information and obligations. Compare the commercial offer, pre-contractual disclosures and agreement: any differences concerning the price or what it includes should be resolved before signing, with independent legal advice.

3. Turn the fee into verifiable deliverables

Prepare a simple table with five columns: item, scope, delivery date, responsible party and evidence of completion. Ask for the agreed details to be incorporated into the agreement or an appendix expressly linked to it.

For example, “equipment included” is not enough. Specify quantities, specifications, equipment condition, warranties and whether ownership will transfer to you or another arrangement applies. It should also be clear who pays for delivery, installation and testing.

For services, avoid vague descriptions such as “start-up support”. Define what will be done, when and how you will verify that it has been provided. If there are in-person sessions, clarify whether travel and subsistence expenses are included.

Also consider these questions:

• Does the quoted amount include Mexican VAT (IVA), or will it be added when invoiced?
• Is the fee quoted in Mexican pesos or another currency? If relevant, how will the exchange rate be determined?
• Which items do you pay the franchisor for, and which do you pay third parties for directly?
• What happens if an included item is no longer available?
• How will incomplete deliveries and deadlines for remedying them be documented?

This is not simply about negotiating a discount. An apparently lower fee may exclude benefits that another offer includes.

4. Compare brands on a like-for-like basis

To compare offers, add the opening costs excluded from each package to its initial fee. Keep recurring payments and the funds needed to sustain operations separate: they serve different purposes and do not disappear simply because the initial package is extensive.

Use the same categories for every brand. Where a price is missing, mark it as outstanding rather than recording it as zero. Obtain quotes for external costs and avoid counting equipment twice if it appears both in the package and in a separate estimate.

Before accepting an offer, ask your accountant to review the taxes and supporting documentation, and your solicitor or legal adviser to check that the promised inclusions are enforceable obligations, not merely advertising claims.

Practical takeaway: do not judge the initial fee solely by its amount. Before buying, you should be able to explain what you will receive, when you will receive it, how you will verify delivery and how much you will need to pay outside the package.