Which Company Should Grant Your Franchises in Mexico?

Before offering your first franchise in Mexico, you need to decide who will act as the franchisor: the company that already operates your business or a new one. This is not merely an accounting decision. It determines who grants rights, receives payments and is responsible for delivering the promised support. A clear structure gives your franchise network identifiable responsibilities from the outset.

1. Distinguish the business from the franchising entity

The trading brand, the premises and the company that manages them are not the same thing. A business may operate publicly under a single name, even though its assets and contracts belong to different people or entities.

Before choosing a structure, map out:

• Who operates the existing outlets and employs their staff.
• Who owns the trade mark and the materials to be shared with franchisees.
• Who has the team that will train and support franchisees.
• Who currently issues invoices and who will receive franchise income.
• Which contracts or commitments could restrict any reorganisation.

The aim is not to create more companies, but to avoid one entity promising resources or rights that belong to another without authorisation to use them.

For example, if the founder owns the trade mark and the operating company intends to grant franchises, that relationship must be put on a proper legal footing. Having the same shareholders or address is no substitute for the necessary documentation.

2. Compare keeping operations and franchising together with separating them

Using the existing company may simplify administration: it already has business activities, staff and operational experience. It also places the obligations arising from company-owned outlets and franchises within a single entity. Before choosing this option, review its financial commitments, disputes and administrative capacity.

Creating a dedicated franchising company may make it easier to identify the income and costs associated with expansion. However, it adds corporate, tax and accounting obligations. It must also have sufficient rights and resources to fulfil its commitments; a newly incorporated company does not automatically acquire the operating company’s experience, assets or contracts.

Compare both options using a budget that includes administration, professional advice, staff and shared services. Do not decide solely on incorporation costs or assume that separating companies removes all liability.

Your choice should answer a specific question: which entity can demonstrably fulfil the franchisor’s obligations? If it needs services from another company in the same group, establish their scope, cost and continuity before you start marketing franchises.

3. Align the structure with Mexican regulations

In Mexico, franchises are specifically regulated under the Federal Law on the Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial, or LFPPI). There is no prior government authorisation that, on its own, qualifies a company to act as a franchisor.

Article 245 addresses franchising arrangements involving a written licence to use a trade mark and the transfer of technical knowledge or provision of technical assistance to maintain consistency. It also establishes a pre-contractual disclosure obligation. Article 246 requires a written agreement and sets out its minimum content.

These obligations fall on the entity granting the franchise. The franchisor’s identity must therefore be consistent across pre-contractual disclosures, the agreement and billing documents. If the company is new, distinguish its age from the original business’s track record: do not present the two as though they were the same.

The organisation of commercial companies is also governed by the General Law on Commercial Companies (Ley General de Sociedades Mercantiles). With legal advice, review the company’s objects, authority to act on its behalf and any necessary corporate resolutions. Incorporating a company does not replace compliance with franchising obligations.

4. Document how the chosen entity will work

Turn the decision into an operational file, not just an organisational chart. It should make clear what each entity will do and what resources and authority it has to do so.

Include the relevant corporate and tax documents, authorisations to use the necessary assets and shared-service agreements. If the operating company will provide trainers, support or facilities, specify responsibilities, costs and availability.

Keep records of franchise income and expenditure separate from those relating to company-owned outlets. This visibility will help you assess whether the franchisor can fund its obligations without confusing outlet sales with resources available to support the network.

Before offering the first franchise, arrange a joint legal and accounting review. It should identify any differences between the entity promising a service, the entity delivering it and the entity collecting payment, along with the contractual and tax implications.

Practical takeaway: choose the company for its actual ability to fulfil its obligations, not for convenience. First put rights, resources and responsibilities in order; then present that structure consistently to prospective franchisees.