Buying a franchise in Argentina: which insurance policies to review

Before buying a franchise, you need to know more than the cost of the initial fee and equipment. A fire, theft or customer claim could threaten the continuity of your business. Being part of a franchise network and sharing a brand does not automatically mean sharing insurance protection. Before signing, check which risks you are taking on, which are covered and how much it will cost to protect your operation.

1. Identify who is liable and who is insured

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the National Civil and Commercial Code. Article 1520 establishes that the parties are independent and, as a general rule, that the franchisor is not liable for the franchisee’s obligations unless the law expressly provides otherwise. Do not assume, therefore, that the brand will cover a loss at your premises.

Insurance contracts also have their own general legal framework under Insurance Law No. 17,418. The Code’s chapter on franchising does not establish a single policy that automatically protects every outlet. Specific requirements may arise from other rules applicable to the business activity, the franchise agreement or the lease.

Ask the franchisor to confirm in writing:

• Which insurance policies you must arrange yourself.
• Whether any network-wide policy includes your outlet.
• Who is named as the insured and what business activity has been declared.
• Which assets, addresses and liabilities are covered.

If you are told that “the brand’s insurance covers everything”, request the documents that demonstrate this. A sales assurance is no substitute for the policy and its terms.

2. Map your operations to specific risks

Do not start by choosing the cheapest package. First, describe how the business will operate: serving customers on site, preparing food, making deliveries, storing stock, using equipment, providing services at customers’ premises and managing people moving through your premises. Then review that description with a registered insurance adviser or broker in Argentina.

Depending on the business activity, consider the following types of protection, without assuming they are universally compulsory:

• Liability insurance: assess cover for third-party claims arising from your operations. Ask about customer accidents and, where relevant, damage or injury associated with products supplied or work carried out.
• Property damage: review cover for fire, theft and other risks affecting fixtures, stock, furniture and equipment. Each type of cover has its own conditions and exclusions.
• Equipment and refrigerated stock: if you depend on machinery or a cold chain, ask specifically about breakdowns and stock losses. Do not assume these are included.
• Business interruption: ask whether cover is available for certain losses during a shutdown and on what terms. This usually depends on the causes and periods specified in the policy.

If you plan to employ staff, also check your obligations under Argentina’s occupational risks system, regulated by Law No. 24,557. Commercial insurance for your premises does not replace the required workplace protection.

3. Review the contract terms before seeking quotes

A clause stating only that “the franchisee must maintain adequate insurance” leaves too many questions unanswered. Ask for precise details of the cover required, sums insured, evidence of cover, policy periods and the procedure for updating requirements.

Pay particular attention if the agreement requires you to name the franchisor as an additional insured or includes a waiver of subrogation clause, under which the insurer waives specified rights to recover payments from another party. These provisions are not equivalent and do not guarantee unlimited protection: ask your adviser to explain their effects and confirm whether the insurer will agree to include them.

You should also clarify who pays the insurance excess or deductible: the portion of a loss that may remain payable by the insured. In Spanish-language insurance documents, this may be called a “franquicia”, which has a different meaning here from the commercial franchise arrangement with the brand.

Compare the franchisor’s requirements with those of the landlord. They may overlap, but there may also be assets or liabilities that none of the proposed policies covers.

Finally, check when you need cover to begin. Your exposure to risk may start during fit-out works, equipment deliveries or initial stock storage, before you open to the public.

4. Budget for the cost and put procedures in place

Request quotes based on the same business activity, location, asset values and cover. Comparing only the premium instalment can conceal significant differences in excesses, exclusions or payout limits.

Include the cost of insurance in your budget, along with a reserve for expenses you may have to meet yourself. Also check how the insured values will be updated: an outdated sum insured may be insufficient to replace assets and, depending on the policy terms, may affect the payout.

Before taking out insurance, decide who will keep the policies, monitor renewal dates and report claims. Notifying the franchisor does not necessarily replace notifying the insurer. Keep inventories, invoices and records that can substantiate your assets and any damage.

Practical takeaway: before signing, gather the contractual requirements, a quote tailored to your operation and a written explanation of what is excluded. Buying with this information allows you to budget more accurately and avoids confusing the backing of a brand with actual insurance cover.