Buying a franchise: currencies and exchange rates in Argentina

A franchise may look affordable when the investment is presented as a single figure in US dollars. However, the amount you need also depends on the currency required for payment, the exchange rate used and the timing of each payment. Before entering Argentina’s franchise market, turn that headline figure into a schedule of clearly documented obligations.

1. Separate the currency of the quote from the currency of payment

Receiving an estimate in dollars is not the same as taking on a debt that must be settled in that currency. Nor is paying in Argentine pesos at the exchange rate on the signing date the same as paying at the rate on the due date.

For each component of the initial investment, ask for four elements to be identified:

• Reference currency: the currency used to present or compare the amount.
• Currency of the obligation: the currency in which the debt is denominated.
• Settlement currency: the currency the creditor actually accepts as payment.
• Conversion rule: how the amount is calculated if payment in another currency is permitted.

Apply this distinction to the initial franchise fee, equipment, furniture and set-up services. Do not assume they all carry the same terms: the franchisor and several suppliers may be involved, each with their own quote.

A useful question is: “If I accept this proposal today and pay on the due date, which document allows me to calculate exactly how much I must pay and in which currency?” If the answer depends on a verbal explanation, the terms need to be more precise.

2. Turn the exchange-rate reference into a verifiable formula

Expressions such as “the day’s dollar rate”, “market exchange rate” or “equivalent in pesos” leave important questions unanswered. Even an identifiable reference may be insufficient unless the terms specify how and when it is applied.

Where conversion is involved, make sure the document sets out:

• The source of the exchange rate and the specific rate used.
• Whether the buying or selling rate applies.
• The date and, where necessary, the time at which the rate is checked.
• What happens on non-business days or when the reference rate is unavailable.
• Who bears commissions, bank charges and any shortfall arising from the transfer.
• How full settlement of the amount is documented.

If the MEP dollar rate — an exchange rate derived from securities transactions in Argentina — is mentioned, ask for the calculation procedure to be explained. It is not enough to treat it as a single quoted rate without specifying the agreed source or methodology.

Also establish which event determines the conversion: the invoice date, the payment due date, the transfer or the crediting of funds to the recipient’s account. A bank delay can create a difference if the contract uses receipt of the money as the reference point. Agreeing how to handle this before paying helps avoid disputes later.

3. Check how the terms are incorporated into the contract

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the Argentine Civil and Commercial Code. This framework does not prescribe a mandatory exchange rate for quoting or paying for all franchises.

Article 1514 also requires the franchisor, before signing, to provide economic and financial information covering two years of performance at comparable outlets that have been operating for a sufficient period. This information helps you assess the opportunity, but it does not replace contractual definitions of your initial payments.

Monetary obligations are also subject to the Code’s general rules. Do not therefore assume that you can unilaterally choose to settle any dollar-denominated debt in pesos: an Argentine lawyer should review the wording and the applicable rules in force.

Compare the commercial proposal with the contract and its annexes. If one document states that the price is fixed while another allows it to be recalculated, request a correction and a clear rule establishing which document takes precedence.

Also distinguish between currency conversion and price revision. The former converts an amount from one currency into another; the latter changes the amount owed. If both appear, insist on an explanation of how they work and have their validity reviewed to avoid overlapping or discretionary adjustments.

4. Test the payment schedule before committing funds

Create a spreadsheet listing each item, creditor, amount, currency, taxes included or still payable, due date and condition that triggers payment. Link each row to a quote or contractual clause, not a conversation.

Then, with your accountant, model different exchange-rate scenarios and delays to opening. The aim is not to forecast the dollar, but to check whether you can meet your obligations when your funds and debts are denominated in different currencies.

Also ask how long each quote remains valid and what happens if equipment is delivered late: does the agreed price still apply, or will a new price be charged? The answer should be documented with the party that will actually collect payment.

Practical conclusion: before signing, make sure you can calculate every payment using the documents available. A clearly defined initial investment sets out how much you owe, in which currency, when it is due and which conversion rule applies.