Mexico

• Author: Jorge Mondragón - Gustavo A. Alcocer
• Pages: 368-384

368 International Franchise Sales Laws

Mexico

I. What Is a Franchise?

A. Scope of Law

Article 142 of the Mexican Industrial Property Law (Industrial Property Law) speci-

fies what a “franchise” is: “a ‘franchise’ exists whenever, in conjunction with a

license to use a trademark granted in writing, technical knowledge is transmitted or

technical assistance is furnished in order to enable the licensee to produce or sell

goods or render services in a uniform manner and with the operating, commercial

and administrative methods established by the holder of the trademark, with the

goal of maintaining the quality, prestige and image of the products or services dis-

tinguished by the trademark.”

Likewise, Article 142 of the Industrial Property Law requires that franchise agree-

ments be in writing and specifies 12 minimum requirements that any franchise agree-

ment must contain. These requirements are discussed in Section V. of this chapter.

The Industrial Property Law and its Regulations (collectively the Mexican Fran-

chise Law) does not apply to other types of agreements or contracts, such as distri-

bution, supply, partnership, or joint venture agreements, unless such contracts contain

provisions related to industrial property or imply the granting of a license or fran-

chise, in which case the applicable requirements and obligations imposed by the

Mexican Franchise Law must be observed.

B. Applicability to Master Franchising

The Mexican Franchise Law does not make any distinction as to its applicability to

Master Franchises or individual unit Franchises. Its provisions and the disclosure

obligations apply to all types of franchises, including Master Franchise arrange-

ments, to be established in Mexico.

C. Exemptions

The Mexican Franchise Law does not provide for any exemptions or exclusions as

to its applicability to franchises and does not provide the regulatory authority in

charge of its application with discretion to determine whether a particular distribu-

tion or similar arrangement is or is not a “franchise.” There are no exemptions for

partnership relationships, trademark licenses, credit card services arrangements,

wholesale distribution agreements, or specific industries (e.g., petroleum dealers or

automotive dealers) if the relationship meets the definition of a franchise set forth in

Article 142 of the Industrial Property Law.

Mexico 369

D. Discretion of Regulatory Authorities

The Mexican Institute of Industrial Property (Instituto Mexicano de la Propiedad

Industrial) (IMPI) is the regulatory authority responsible for administering the Mexi-

can Franchise Law. However, IMPI is not empowered to determine if a specific

agreement or contract constitutes a franchise arrangement, including a particular

distribution or licensing agreement. Such authority is reserved to the civil courts.

E. Jurisdiction

The provisions of the Mexican Franchise Law must be observed in the territory of

Mexico, in addition to the provisions of international treaties to which Mexico is a

party. The Mexican Franchise Law applies to franchises to be located in or to be

operated within the Mexican territory, regardless of the nationality of the entities or

individuals involved in or participating in the franchise. The Mexican Franchise

Law applies to the sale and offer of franchises to entities or individuals in Mexico or

to be operated in Mexico; however, it does not apply to franchised business to be

operated outside of Mexico or merely because (1) the prospective Franchisee is a

resident of or domiciled in Mexico; (2) the offer to sell originates in Mexico; or (3)

the offer is directed to, or accepted from, Mexico.

II. Who Must Provide Disclosure?

A. Franchisor

Article 142 of the Industrial Property Law requires “the grantor of a franchise” to

provide disclosure to a prospective Franchisee. This requires a Franchisor to provide

disclosure to a prospective Master Franchisee and each prospective Franchisee.

B. Master Franchisee

Assuming the Master Franchisee holds sufficient rights in the franchise to execute a

sub-franchise agreement, then the Master Franchisee would also qualify as the grantor

of a franchise and is required to provide a disclosure document to a prospective

Sub-franchisee.

C. Franchise Consultant/Agent/Broker

Mexican Franchise Law does not impose a requirement for a franchise consultant,

agent, or franchise broker who is representing a Franchisor to provide a disclosure

document to a prospective Franchisee.

D. Franchisor or Others in Master Franchise Arrangement

As previously stated, the grantor of a franchise is required to provide disclosure to

a prospective Master Franchisee and each prospective Franchisee. If a Master Fran-