The Franchise Law Review - Corporate/Commercial Law - Mondaq Mexico - Mondaq Business Briefing - Books and Journals - VLEX 782370429

The Franchise Law Review

Author:Mr Silverio Sandate
Profession:Von Wobeser & Sierra, S.C.
 
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I INTRODUCTION

The Mexican franchise market is still considered to be a fresh and growing market, and one that continues to offer good opportunities for people wanting to start a business, people seeking to develop a business or expand a brand, or people already involved with business.

In this regard, there is even a programme sponsored by the Secretariat of Economy, the purpose of which is to provide support to people willing to invest in the acquisition of a franchise. This support consists in the granting of financing under preferential conditions. However, resources obtained under this programme cannot be used to acquire a franchise; the franchise must be registered before this applying to the programme. In this way, the programme not only supports potential franchisees, but also has an impact on franchisors.2

The Mexican franchise market is composed of Mexican brands and foreign brands from many other countries. It is estimated that more than 50 per cent of the brands franchised are Mexican; however, the most enduring franchises correspond to brands with presence in the United States and around the world, and the cost of accessing these is very high.3

In the private sector, the Mexican Franchise Association4 is a legal entity that seeks to support the development of the franchise market in Mexico. Some of the goals pursued by this association are to develop and promote activities to improve conditions for the franchise market, to host and organise events promoting the professionalisation of the franchise field, and to develop a bank of relevant statistics.

As regards available governmental information, studies prepared by the National Institute of Statistics and Geography on 'Franchise Catalogues in Mexico' for 2008 and 2012 offer only lists of franchises but no other relevant data.

II MARKET ENTRY

i Restrictions

There are no general restrictions on foreign franchisors entering the Mexican market. However, restrictions may apply depending on the type of products or services offered or commercialised by the franchise.

Furthermore, there are no established restrictions on foreign franchisors or foreign entities granting master franchises or granting development rights to local entities.

Regarding real state, foreign persons or entities are not entitled to acquire properties located within a band 100 kilometres wide along the country's borders nor within 50 kilometres of its beaches.

ii Foreign exchange and tax

Among the most common tax liabilities relevant to cross-border franchising are royalty payments, tax withholding and deductions. In Mexico, royalties are considered to be any kind of payment for the use or temporary enjoyment of patents, trademarks, copyright, artistic or scientific works, industrial, commercial or scientific designs, among others. However, in Mexico the tax treatment of cross-border franchising depends largely on the tax residence of the...

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