The COF in Mexico: how to prepare it and document its delivery

Turning a business into a franchise means clearly explaining what is on offer before asking anyone to sign. Pre-contractual information, usually brought together in the Circular de Oferta de Franquicia (COF), or franchise disclosure document, should not be put together as though it were a sales brochure. For businesses starting to franchise in Mexico, a procedure for preparing, reviewing and delivering this information helps prevent inconsistencies and preserve evidence of what was communicated.

1. Identify the correct legal obligation

Mexico does have legislation specifically governing franchises. Article 245 of the Federal Law on the Protection of Industrial Property (LFPPI) requires anyone granting a franchise to provide the prospective franchisee with information on the state of their business at least thirty days before entering into the relevant agreement.

The law does not require the document to carry the customary COF title. What matters is meeting the applicable content and timing requirements, not simply adding that title to a presentation.

Article 65 of the Regulations under the Industrial Property Law, which apply insofar as they do not conflict with the LFPPI, sets out the technical, economic and financial information that must be provided. Although it refers to Article 142 of the previous law, it must be read within the current legal framework.

Do not attribute this obligation to a supposed NOM-010 standard on franchises. Its legal basis is industrial property legislation. Nor should the statutory period be presented as a general rule requiring disclosure thirty days before any payment: Article 245 links it to entering into the agreement. Advance payments and reservation agreements require specific legal review and must not be used to circumvent prior disclosure.

2. Assemble a file with clear responsibilities and supporting records

Before drafting, divide the information-gathering work between administration, operations and legal advisers. One person should coordinate the file and check that every department is describing the same offer.

The minimum information required by the regulations includes:

• The franchisor’s name or registered business name, address and nationality.
• A description of the franchise and how long the original franchisor and, where applicable, the master franchisor have been in that business.
• The intellectual property rights involved.
• The amounts payable to the franchisor and what each payment covers.
• The technical assistance and services to be provided.
• A definition of the operating territory.
• Whether sub-franchising is permitted and the relevant requirements.
• Obligations concerning confidential information.
• More generally, the rights and obligations arising from the agreement.

Identify supporting records for each item, such as corporate documents, trade mark files, approved fee schedules or training programmes. These records help verify the statements made; this does not mean they must all be supplied in full as mandatory appendices.

If there are no franchised outlets yet, say so explicitly. Distinguish experience gained through company-owned outlets from experience as a franchisor. Do not present the business’s years of trading as years of operating a franchise network that does not yet exist.

3. Align the COF with the offer and the agreement

Create an internal table with four columns: topic, sales claim, COF content and contractual clause. Pay particular attention to payments, territory, training, supply arrangements and support.

For example, if the sales team promises on-site support during opening, clarify its duration and scope, and who pays the expenses. If there is an advertising fee, explain what it covers and how it is calculated. A phrase such as ‘ongoing support’ does not make clear what service the franchisee will receive.

Article 246 of the LFPPI requires a written agreement containing certain minimum provisions. The COF does not replace the agreement, and the agreement alone does not remedy incomplete or contradictory prior disclosure.

When sharing sales or investment payback estimates, keep them separate from historical results. Document the assumptions, reference period, costs included and limitations. Do not turn the results of a company-owned outlet into a profitability guarantee for every location. Including useful additional information does not justify presenting it as a universal legal requirement.

4. Manage delivery and the timetable

Assign each COF a date and version identifier. Retain the exact file delivered, its appendices and the recipient’s identity. Record the date of receipt and have the proposed signing date checked by legal advisers to ensure the statutory period is observed in full.

An acknowledgement of receipt should identify the document and its appendices, rather than merely state ‘I have received information’. For electronic delivery, use a method that can establish the content, recipient and receipt; a link whose content can change provides weaker evidence.

The acknowledgement proves delivery: it should not be treated as a waiver of the prospective franchisee’s rights. Nor is it advisable to rely solely on the salesperson’s informal records.

5. Manage changes before signing

Introduce a final review to identify changes to fees, territory or services. If you amend material information, deliver an updated version and seek legal advice on the implications for the timetable. As a cautious internal policy, you may restart the review period following substantial changes, while distinguishing that decision from an automatic legal rule.

Practical application: before recruiting prospective franchisees, have a reviewed COF, a person responsible for updates, a precise acknowledgement of receipt and a system for tracking dates ready. The aim is to demonstrate what information each prospective franchisee received and how far in advance.