Buying a franchise in Argentina: how to agree reservation terms

Reserving a franchise may seem like a formality to secure an opportunity. However, that initial payment can create obligations before you have finished assessing the business. To make an informed decision about entering the franchise market, you need to know what you are reserving, for how long and what happens to your money if the transaction does not go ahead.

1. Establish what commitment you are making

The Buenos Aires City Government’s guide to developing franchise networks distinguishes between the sales information pack, confirmation of the reservation and the franchise agreement. This commercial sequence does not mean that every reservation has the same legal effect: what matters is the document’s content and the obligations undertaken, not just its title.

Before paying, ask for the full document and check whether it is a temporary reservation, an offer subject to acceptance or a commitment to enter into the final agreement. Even a short document can contain significant obligations.

The reservation should identify:

• Who receives the money: the company’s registered name or the individual’s name, their tax identification number and the capacity in which they are acting.
• Which opportunity is being reserved: the brand, format and location or search area, as appropriate.
• What the franchisor does in return: for example, suspending discussions with other interested parties about that specific opportunity.
• When it expires: a precise date and a procedure for agreeing an extension.
• What happens next: provision of documents, assessment of the premises and review of the final agreement.

If an intermediary is involved, check that they are authorised to collect the money and that the franchisor acknowledges the payment and its effects in writing.

2. Check the legal framework before advancing funds

In Argentina, franchise agreements are specifically governed by Articles 1512 to 1524 of the National Civil and Commercial Code. Negotiations are also subject to the general rules on contracts and pre-contractual good faith.

Article 1514(a) requires the franchisor, before the agreement is signed, to provide economic and financial information covering two years of performance by units similar to the one being offered, which have operated for a sufficient period in Argentina or abroad.

Although this obligation relates to signing the agreement, it is prudent to request and analyse this information before making a reservation payment that you could lose. Do not let payment replace a proper assessment of the business.

Do not confuse proposed legislation with rules currently in force. The Code’s franchise provisions do not set a general twenty-day period for providing information or establish a national register of franchisors. Nor should you assume that an automatic right to cancel applies as it might to a consumer purchase: buying a franchise to operate commercially requires a different legal assessment.

Ask a lawyer to pay particular attention to any clause that turns the reservation into an obligation to enter into the agreement or imposes a penalty if you decide not to proceed.

3. Agree what happens to the money

The word ‘reservation’ alone does not explain whether the amount is refundable, pays for a service or will be deducted from a later payment. All of this must be set out in writing.

Separate three issues: what the payment is for, the grounds for a refund and the procedure for recovering it. If it will be credited towards the initial franchise fee, specify how much will be deducted and when. If expenses may be deducted, insist that they are identified, subject to an agreed cap and documented.

It is worth addressing several scenarios:

• The franchisor rejects your application.
• No premises meeting the agreed conditions can be found.
• A technical assessment determines that the premises are unsuitable.
• You do not obtain the planned financing, where this has been expressly agreed as a condition.
• The agreement presented contains terms that differ from those on which the reservation was made.
• You decide not to proceed for personal reasons.

These scenarios do not necessarily all need to have the same outcome. What matters is agreeing the terms before paying, with a clear refund deadline and notification procedure. Keep proof of payment and a receipt specifying what the payment was for.

4. Make the reservation a period for assessment

A useful reservation allows you to complete your checks; it should not force you to decide without them. Prepare a timetable listing outstanding documents, who is responsible for each task and deadlines. Include an accounting review of the figures and a legal review of the agreement and its annexes.

If anything is still outstanding as the deadline approaches, request a written extension before the reservation expires. Avoid clauses that treat your silence as acceptance of the final agreement or authorise further charges without express approval.

Practical conclusion: before reserving, settle four questions: what you receive, for how long, what the payment will be applied to and in which circumstances you can recover it. If any answer depends on a verbal promise, there is still more to negotiate.