MEXICO Law and Practice Contributed by: Gustavo A. Alcocer, Luis Astorga, Isabella Montero Torres and Fernanda Martínez Zolezzi, OLIVARES
requirements for entering into a franchise agreement and the elements that must be included in a franchise agreement, among other matters. The Regulations, in turn, primarily establish the requirements that must be satisfied by the franchise disclosure document (FDD). However, other laws may apply on a supplemen - tary basis, including the Commercial Code ( Código de Comercio ), the Federal Civil Code ( Código Civil Federal ), the Federal Economic Competition Law ( Ley Federal de Competencia Económica – LFCE), the Consumer Protection Act ( Ley Federal de Protección al Consumidor ) and the Federal Law for the Protection of Personal Data Held by Private Parties ( Ley Federal de Protección de Datos Personales en Posesión de los Particulares ), among others, depending on the nature of the franchise. For example, the LFCE may apply where the franchise relationship involves competition- related matters. 1.3 Definition of a Franchise Agreement A franchise exists when, pursuant to a written trade mark licence, technical know-how is transferred or technical assistance is provided so that the licence holder may produce or sell goods, or provide servic - es, in a uniform manner and in accordance with the operating, commercial and administrative methods established by the trade mark owner, with the pur - pose of maintaining the quality, reputation and image associated with the products or services identified by the trade mark. The foregoing definition identifies four essential ele - ments that, taken together, constitute a franchise. • First, there must necessarily be a trade mark licence; a franchise cannot exist without one. • Second, there must be a transfer of know-how or the provision of technical assistance. The fran - chisee is not merely granted the right to use the trade mark, but also receives know-how, training, manuals and operating methods. • Third, the business must be operated uniformly, as the franchisee must produce, sell, or provide services in accordance with the operating commer - cial and administrative methods established by the franchisor.
• Finally, preservation of the brand’s identity is essential, as the franchise model seeks to maintain the quality, reputation and image associated with the brand.
2. Franchise Disclosure 2.1 Mandatory Disclosure
The LFPPI establishes a statutory pre-contractual dis - closure obligation, under which a franchisor must pro - vide the prospective franchisee, at least 30 business days prior to entering into the franchise agreement, with information regarding the status of its business, in accordance with the disclosure requirements set forth in the Regulations to the LFPPI. The regulations establish the technical, economic and financial information that must be disclosed, includ - ing: • the name, corporate name or legal name, address and nationality of the franchisor; • a description of the franchise; • the length of time the original franchisor and, where applicable, the master franchisor have been operating the business that is the subject of the franchise; • the intellectual property rights involved in the fran - chise; • the amounts and concepts of the payments to be made by the franchisee to the franchisor; • the types of technical assistance and services that the franchisor must provide to the franchisee; • the geographic territory in which the franchise will operate; • whether the franchisee has the right to grant sub - franchises to third parties and, where applicable, the requirements that must be satisfied to do so; • the franchisee’s obligations regarding confidential information provided by the franchisor; • information regarding whether the franchised busi - ness derives from a master franchise agreement, development agreement, multi-unit agreement or similar arrangement; • the obligations and rights of the franchisee arising from the execution of the franchise agreement;
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