In article 142 of the Law of Industrial Property we found:
- – The requirements of existence of the franchising agreement: a license to use brands and the transfer of technical knowledge.
- – The purpose of the transfer of knowledge: allow the franchisee to offer products and services of the same quality as the products or services of the franchisor.
- – The obligation of the franchisor to grant to the franchisee, previously to the conclusion of the franchising agreement, the information required by the Regulation of the Law of Industrial Property.
Article 65 of the Regulation forces the franchisor to grant to the franchisee two categories of information:
- – Information about the company of the franchisor (name, address, nationality, experience)
- – Information about the contract of franchising agreement that will be concluded
- Type of franchise
- Rights of intellectual property involved
- Right of the franchisee to operate in an exclusive zone
- Right or absence of the right of franchisee to sub-franchise
Obligations of the franchisee in matter of payments and confidentiality Services that the franchisor must grant to the franchisee
The decree of January 25th, 2006 maintains in existence article 65 of the Regulation of the Law of Industrial Property without modification, completes article 142 of the Law of Industrial Property and adds to it: articles 142Bis, 142Bis1, 142Bis2 y 142Bis3.
1.- Precisions that are added to article 142 of the Law of Industrial Property:
- – The license to use brands has to be given in writing
- – The franchisor must grant the information to the franchisee 30 days before the conclusion of the contract
- – The sanctions in case of lack of veracity of the information will be the action of nullity of the franchising agreement and the action for the payment of damages; the action for the payment of damages prescribes in one year counted from the conclusion of the contract.
2.- Creation of articles 142Bis, 142Bis1, 142Bis2 y 142Bis3
- The obligation to define, in the contract, the geographical zone in which the franchisee will exert his activities
- The obligation to indicate in the contract if the franchisee will have the right or not to sub-franchise and in that case, the conditions to follow
- The right of the franchisee and its personnel to receive technical training.
- The location of the future establishment and the amount of the investment that the franchisee must realize
- The politics in matter of inventories, marketing research, publicity, products supply, financing that the franchisee must follow
- The utility or commission of the franchisee
- The politics in matter of supervision and evaluation of the performance of the franchisee
- The causes and consequences of the modification or termination of the franchising agreement
- To guarantee the respect of the standards of administration and the image of the franchisor
- In case of modification of the personal characteristics of the franchisee (merger, splitting, transformation)
- – Article 142Bis in one hand indicates requirements already mentioned in article 65 of the Regulation
– On the other hand this article indicates requirements that article 65 of the Regulation does not mention. The contract must indicate:
– Article 142Bis1 gives the franchisor the right to intervene in the organization of the company of the franchisee:
– Article 142Bis2 relates to the obligation of confidentiality of the franchisee during the life of the contract and once this is terminated (this obligation is also mentioned in article 65 of the Regulation)
- – Article 142Bis3 partially regulates the anticipated termination of the franchising agreement and stipulates that this termination must be done according to the contract and, if it is not so, conventional penalties or damages will be applied.
In conclusion we can underline the fact that in Mexico, Law does not yet entirely regulate the franchising agreement; the existing regulation is relative to the information that the franchisor must provide to the franchisee before they sign the contract and to the type of provisions that the franchising agreement must include, without indicating what should be the content of these provisions.
The only rules established directly by the Law or its Regulation are the ones relative to the right of the franchisor to intervene in the organization of the franchisee, the obligation of confidentiality of the franchisee and the prohibition made to the parties to terminate a franchising agreement of definite period in an anticipated and unilateral way.
Jean Boudaud, IDI country expert for Mexico.