MEXICO Law and Practice Contributed by: Gustavo A. Alcocer, Luis Astorga, Isabella Montero Torres and Fernanda Martínez Zolezzi, OLIVARES
In addition, the franchisor’s supervisory training and technical assistance rights should be clearly limited to matters concerning the franchise’s standards and operations, ensuring that the exercise of such rights does not result in the direction, management or sub - ordination of the franchisee’s personnel. 7.2 Vicarious Liability In Mexico, there is no general rule under which a franchisor is liable for losses or damages caused by a franchisee solely by virtue of the existence of a franchise relationship. Mexican law recognises the contractual and private law nature of the relationship between franchisor and franchisee, with both parties acting as legally independent entities. Although a franchisor may exercise a certain degree of oversight over the franchisee’s organisation and operations to ensure compliance with the franchise’s administrative, operational and brandings standards, such oversight does not give rise to liability for the franchisee’s acts. The potential liability of the franchisor towards third parties would depend on the specific circumstances of the case. For example, liability could potentially arise where there is a clear employment subordina - tion relationship between the franchisor and the fran - chisee’s employees, and the contractual arrange - ments have not adequately addressed or limited the corresponding risk. 8. Choice of Governing Law 8.1 Possibility of a Franchisor Stipulating Non-Local Law Under Mexican law, the parties may agree to apply the laws of a foreign jurisdiction to a franchise agree - ment, provided that such choice of law is not intended to circumvent Mexican provisions of public policy or mandatory application. 8.2 Local Law Requirements The LFPPI does not require franchise agreements to be governed by Mexican law. On the contrary, Mexi - can civil law recognises the parties’ right to validly
designate a different governing law in their agree - ments. 8.3 Mandatory Content Article 246 of the LFPPI requires franchise agreements to be executed in writing and establishes the minimum requirements that such agreements must contains, as follows: • the geographic territory in which the franchisee will conduct the activities contemplated under the agreement; • the location, minimum size and characteristics of the infrastructure investments required for the establishment where the franchisee will conduct the activities contemplated under the agreement; • the inventory, marketing and advertising policies, as well as provisions regarding the supply of goods and engagement of suppliers, where applicable; • the policies, procedures and time periods applica - ble to reimbursements, financing and other con - sideration payable by the parties pursuant to the terms agreed in the contract; • the criteria and methods applicable to determining the franchisee’s profit margins or commissions; • the characteristics of the franchisee’s technical and operational training, as well as the method or man - ner in which the franchisor will provide technical assistance; • the criteria, methods and procedures for super - vision, reporting, performance evaluation and assessment, as well as the quality of the services to be provided by the franchisor and the fran - chisee; • the terms and conditions applicable to the granting of subfranchises, if agreed by the parties; • the grounds for termination of the franchise agree - ment; and • the circumstances under which the terms or condi - tions of the franchise agreement may be reviewed and, where applicable, amended by mutual agree - ment of the parties. Likewise, applicable Mexican law recognises the right to terminate a franchise agreement for breach, provided that the agreement is for an indefinite term and there is just cause. Any early termination of right should be aligned with the grounds and procedures
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