Buying a franchise with business partners: what to agree in Argentina

Buying a franchise with business partners allows you to share the investment and responsibilities, but it also means aligning interests that may change over time. In franchising, the relationship with the brand does not replace agreements between those contributing money and work. Before committing funds, you need to establish who will be the franchisee and how the relationship between the investors will work.

1. Decide who is buying and who will be legally bound

Having one person sign the contract and receive contributions from others is not the same as contracting through a company owned by everyone involved. The identity of the franchisee determines who acquires the rights and assumes the obligations towards the franchisor. A private agreement between friends or relatives does not automatically make everyone a party to the franchise agreement.

Argentina specifically regulates franchise agreements under Articles 1512 to 1524 of the national Civil and Commercial Code, which have been in force since 2015. Article 1520 establishes that the parties are independent. That independence does not, in itself, determine how the franchisee’s business partners should organise their relationship.

If you decide to use a company, you must also consider General Companies Law No. 19,550, depending on the legal form chosen, and the applicable registration rules. Choosing the right structure requires legal and accounting advice: formation costs should not be the only consideration.

Before paying anything, prepare an outline identifying:

• Who will sign the franchise agreement and in what capacity.
• Who will sign the lease, employ staff and contract for services.
• Who will issue sales invoices and hold the bank accounts.
• Who will contribute money and under what legal arrangement.

Avoid signing in your personal capacity on the assumption that you can later transfer the contract to a company without permission. Any such substitution should be reviewed and agreed in advance.

2. Separate capital contributions, loans and work

“We’ll each put in half” can conceal significant differences. One person might contribute money at the outset while another promises to work during the launch. Someone might also pay expenses from a personal account and then expect reimbursement before profits are distributed.

Document each commitment, including its amount or valuation method, due date and nature. Distinguish between a capital contribution, a loan from a business partner and expenses paid on behalf of the business. These do not necessarily receive the same legal, accounting or financial treatment.

Work also needs a separate agreement. Define duties, time commitments, remuneration and who will approve changes, taking advice on the appropriate legal arrangements. A share of the profits should not be confused with payment for work.

For example, if both partners hold equal stakes but only one manages the outlet, it is best to agree how that management role will be paid before opening. Leaving it until sales start often turns a foreseeable issue into a personal dispute.

Also agree what will happen if additional funding is needed: how it will be approved, when it must be provided and what options are available if someone cannot contribute. Any resulting changes to ownership stakes must be properly formalised; recording them in a spreadsheet is not enough.

3. Organise decision-making without bringing the outlet to a standstill

The franchise agreement sets out obligations towards the brand. The agreement between business partners should allow those obligations to be met without requiring internal negotiations over every day-to-day decision.

Separate operational decisions from exceptional ones. One person might be authorised to handle routine purchases or coordinate staff schedules within an approved budget. By contrast, taking on debt, committing to substantial expenditure or opening another outlet may require specific approval.

Define four points clearly:

• Authority: what each person responsible can decide.
• Limits: which expenses require further approval.
• Information: which reports all partners will receive and when.
• Disagreements: how a tied vote will be resolved.

Equal ownership requires particular care: without a mechanism for breaking deadlock, two partners can prevent each other from acting. The chosen procedure must be consistent with the company documents and should not rely solely on goodwill.

4. Check your internal agreement against the brand’s requirements

Ask for the full franchise agreement before finalising the agreement between business partners. Check whether it requires a specified operator, permission to bring in investors or consent to changes of control. A change in ownership and an assignment of the contract are not necessarily the same thing, although the contract may cover both situations.

Also check who may represent the franchisee in dealings with the brand and receive important communications. An internal authorisation does not, by itself, change the obligations undertaken towards the franchisor.

Ask a lawyer to review the franchise agreement, company documents and agreement between business partners together. An accountant should check that the proposed contributions, loans and remuneration can be recorded correctly.

Practical takeaway: before buying, put in writing who signs, who contributes, who works and who decides. If those four questions still prompt disagreements, resolve them before committing to the investment.