Letter of intent for franchising in Mexico: what to include

When you turn your business into a franchise, a prospective franchisee may ask to ‘get something signed’ while they assess the opportunity. A letter of intent can help structure this stage, but it can also create obligations that neither party anticipated. In franchising, its value lies in defining the scope of negotiations, not in replacing the final agreement or promising an opening before its feasibility has been established.

1. Define the purpose of the letter

Before drafting it, identify what both parties need to establish. The candidate may need to demonstrate that they have sufficient funds, understand the operation or review the proposed terms with their advisers. You may need to confirm who will make the investment and who will run the outlet.

The letter should turn these needs into a plan of action. Include:

• Purpose: to assess the possibility of entering into a franchise agreement for a specified format and location or area.
• Participants: who is negotiating for each party and in what capacity.
• Outstanding activities: meetings, document exchanges and necessary reviews.
• Responsibilities: who will provide each item and who will review it.
• Assessment deadline: when the parties will decide whether to proceed.

Do not present an area of interest as a territory that has already been granted. Nor should you describe a provisional opening date as a firm commitment. If decisions remain outstanding, explicitly identify them as such.

For example, you could state that the candidate will explore an opportunity in a particular city, without this implying exclusivity, permission to use the brand or approval of any premises.

2. Separate intentions from obligations

The document’s title does not, on its own, determine its legal effect. Writing ‘letter of intent’ or ‘non-binding document’ in the heading does not override clauses whose substance creates enforceable commitments. The full text should undergo legal review under the applicable contract law.

A practical structure separates two categories:

Matters subject to negotiation. These may include the outlet format, the area under consideration, the estimated timetable and preliminary commercial terms. Make clear that these require assessment and, where appropriate, inclusion in the final agreement.

Obligations the parties do intend to assume. Examples include how assessment costs will be shared, which announcements may be made publicly and how exchanged documents will be handled. Specify how long these obligations last and what happens when negotiations end.

If exclusivity in negotiations is proposed, define its scope particularly carefully: whom it binds, which opportunities it covers, how long it lasts and how it ends. Do not confuse it with territorial exclusivity to operate a franchise.

Avoid contradictory wording, such as stating that neither party is obliged to enter into an agreement and then requiring an outlet to open. It is also advisable to state that any permission to use the brand must be expressly granted separately.

3. Comply with Mexican franchise regulations

In Mexico, franchising is specifically regulated by the Federal Law for the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial, or LFPPI). A letter of intent is not a general legal requirement for granting a franchise: it is an optional negotiating tool.

Article 245 requires prospective franchisees to receive information on the state of the business at least thirty days before the franchise agreement is signed. This information is usually compiled in the Circular de Oferta de Franquicia, known as the COF, or franchise offering circular. Signing a letter of intent does not replace the provision of this information or remove the legally required advance disclosure period.

Article 246, meanwhile, requires the franchise agreement to be in writing and to contain certain minimum provisions. These include the territory, the characteristics of the premises, fees and other payments, training, technical assistance and supervision criteria.

It is therefore not enough to label a document ‘preliminary’ if it actually grants operating rights and establishes a franchise relationship. Ask your adviser to review its content and effects before using it. Nor should you present the letter as government approval of the business model: it is not.

4. Set out how the assessment will continue or end

A useful letter needs a clear exit process. Define how the parties will communicate their wish to proceed, request more time or end discussions. Avoid indefinite renewals through silence, and document any extension.

At the end of the assessment, record which matters have been resolved and which remain open. If both parties wish to proceed, carry the relevant agreed terms into the final agreement, without automatically incorporating contradictory emails, proposals or drafts.

If they decide not to proceed, address any obligations that must survive, such as document handling or previously agreed costs. Do not announce the candidate as a member of the franchise network before their admission has been formalised.

Practical takeaway: use the letter to organise outstanding decisions, not to establish a franchise prematurely. Before signing it, check which provisions are binding, what remains subject to negotiation and how the process can end.