Buying a franchise: equipment and replacement costs in Argentina

An essential machine breaking down can bring sales to a halt while rent and other expenses keep mounting. Before buying a franchise in Argentina, you need to know more than the price of the initial equipment: you also need to establish who will own it, how it will be maintained and who will pay to replace it. These details help turn an advertised franchise investment into a realistic operating budget.

1. Separate included equipment from equipment you must arrange separately

Ask for a detailed inventory to accompany the financial proposal. The phrase “fully equipped premises” does not tell you what you will receive or allow you to compare offers. Each item should have a description, quantity, technical specifications, condition — new or used — and a named party responsible for delivery.

For each item, also establish the basis on which it will be supplied to your business:

• Purchase: check who issues the invoice, whose name the purchase is recorded in and what the price includes.
• Hire: review the recurring charge, price adjustments, maintenance arrangements and return conditions.
• Free loan (comodato): the contract should specify who is lending the equipment free of charge and what obligations you take on to look after it and return it.
• Supply tied to purchasing commitments: check whether receiving a machine requires minimum purchases or other commitments.

Do not confuse having equipment installed with owning it. If the budget includes items belonging to the franchisor or a supplier, you should not count them as your own assets when assessing the investment.

Add the costs needed to get the equipment running: transport, installation, connections, calibration and testing. Ask for an explicit statement of which costs are included and which you must cover.

2. Check technical requirements against the contract

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the national Civil and Commercial Code. Article 1512 links franchising to the right to use a proven system, the transfer of technical know-how and ongoing technical or commercial assistance.

Article 1514 also includes, among the franchisor’s obligations, providing an operations manual and assistance to help the franchise operate effectively. This makes it important to check that the equipment offered is compatible with the system you will be running.

However, ongoing assistance does not in itself amount to a guarantee of free repairs or replacement equipment. You need to check these provisions in the contract, its annexes and the supplier’s terms and conditions.

Before committing, request the specifications that determine the investment required and ask:

• Are particular models mandatory, or are technically approved equivalents allowed?
• Who confirms that the installation meets operating requirements?
• What happens if the equipment quoted for is discontinued before delivery?
• Who is responsible if the equipment delivered does not match what was approved?

Ask an Argentinian lawyer to check that these documents are consistent. A commercial recommendation should not be confused with a contractual obligation, and a maintenance promise should not be left out of the agreement.

3. Calculate the cost of keeping the business running

The purchase price is only part of the cost. Prepare a record for each critical piece of equipment covering preventive maintenance, specialist consumables, spare parts, technical servicing and any licences needed to operate it.

Next, check what the warranty actually covers. Establish who provides it, when it starts, what it excludes and what procedure you must follow to make a claim. Ask whether transport, technician call-outs and labour are included. Do not assume all warranties provide the same cover.

Service availability matters as much as price. Ask whether technicians cover your location, which spare parts are usually available and whether there is a temporary solution while repairs are being carried out.

To budget for downtime, consider scenarios rather than treating them as forecasts: a quick repair, a prolonged delay or a full replacement. Estimate the additional expense and the impact of lost sales. This will help you decide how much to set aside and which commitments are worth negotiating.

4. Plan for replacement before it becomes urgent

Distinguish between three reasons for replacement: wear and tear, breakdown and upgrades required by the brand. Responsibility and timing may differ for each.

If the contract allows new equipment to be required, look for clear criteria covering the reasons, advance notice, technical documentation and what happens to equipment that is still usable. Avoid treating the initial installation as a one-off cost if further investment could be required during the franchise relationship.

Work with your accountant to prepare an indicative replacement schedule based on expected use and the technical information available. Accounting depreciation is no substitute for the money needed to buy another machine: you also need to forecast that cash outflow.

Next steps: compile a priced inventory, the maintenance terms and an estimate of replacement costs. If you cannot identify what you will receive, what you will own and how much it will cost to keep it operational, a significant part of your purchase budget is still missing.