Buying an Existing Franchise in Argentina: What to Check

Buying an established franchise lets you assess a business that is already trading, but raises a crucial question: what exactly are you buying? The premises, the assets and the right to operate under the brand are not the same thing. To join a franchise network by buying an existing outlet, you need to coordinate the acquisition with both the seller and the franchisor, rather than assuming everything transfers automatically.

1. Define what the purchase includes

Before discussing the price, ask for a written description of the proposed transaction. Buying equipment and stock is not the same as acquiring a business as a going concern or buying shares in the company that operates it. Each option carries different risks and requires different documentation.

If you buy shares, the company remains party to its existing legal relationships and retains its obligations. Checking only the debts disclosed by the seller is therefore not enough: you need corporate, accounting, tax and employment due diligence covering the company's history.

If the transaction involves the transfer of a business as a going concern, known in Argentina as a fondo de comercio, you should assess whether Law 11,867 applies. This law governs such transfers and provides for public notices and creditor protection. A private agreement between buyer and seller does not replace any required formalities.

Draw up an inventory distinguishing between:

• Assets owned by the seller, with documents proving ownership.
• Equipment that is leased, financed or provided on loan free of charge.
• Usable stock and goods that are expired, damaged or difficult to sell.
• Contracts, permits and rights whose continuation requires consent or a formal procedure.

Do not assign value to an asset the seller cannot transfer.

2. Confirm that you can continue operating under the brand

In Argentina, franchising is specifically regulated by Articles 1512–1524 of the National Civil and Commercial Code. Article 1518 provides that, unless otherwise agreed, a franchisee cannot transfer its contractual position or rights arising from the contract while it remains in force, except for rights of a monetary nature.

Buying the business therefore does not automatically make you a franchisee. Review the existing agreement and obtain written confirmation from the franchisor of the proposed arrangements before committing to the purchase price.

Continued operation may be arranged through an approved transfer of the existing agreement or through a new contract. The distinction matters: a new contract may introduce different financial terms, upgrade obligations or a different scope of rights. With a transfer, you need to identify which obligations you take on and which remain with the seller.

Ask for clarification on four points:

1. What assessment the buyer must pass.
2. Which document will authorise continued operation and who will sign it.
3. Whether there are transfer, joining or training fees.
4. Whether approval requires refurbishment, updated branding or replacement equipment.

If you are buying a company, also check whether the agreement contains change-of-control provisions. Keeping the same legal entity as the franchisee does not necessarily remove the need for approval.

3. Review outstanding obligations

An outlet may appear to be trading normally while carrying obligations that affect the purchase. Request supporting documents and have them checked by independent advisers; a general statement that “everything is up to date” is not enough.

With the seller's authorisation, ask the franchisor for a statement of account and confirmation of any notified breaches, outstanding formal demands or requirements to bring the outlet into compliance. Also identify any commercial discounts that may end when the operator changes.

Pay particular attention to:

• Customers: advance payments received, outstanding orders, subscriptions, warranties and benefits that customers can still redeem.
• Suppliers: unpaid balances, assets belonging to third parties and existing purchase commitments.
• Staff: length of service, pay, leave and claims. Transferring a business establishment may have employment-law consequences that do not disappear simply because the parties agree that the seller remains responsible for debts.
• Premises: the landlord's consent where required, and whether the lease can actually continue.

The contractual allocation of responsibilities between buyer and seller may not be enforceable against third parties. Ask your lawyer to distinguish between risks you can limit through agreements and those requiring further checks or safeguards.

4. Make completion conditional and verifiable

Avoid paying as though the transaction were complete while an essential approval is still outstanding. With professional advice, make completion subject to specific conditions: franchisor approval, documentation securing continuity of the franchise arrangements, confirmation of the lease position and compliance with the formalities applicable to the transfer.

Prepare a handover record covering the final inventory, the condition of the assets, outstanding orders and the date from which each party is entitled to revenue and responsible for expenses. Also agree how the price will be adjusted if the actual inventory differs from what was disclosed. Where potential liabilities have been identified, consider properly documented guarantees or retention of part of the purchase price, without treating these as a universal solution.

Practical conclusion: before buying an existing franchise, establish three things in writing: what you will receive, what authorisation you will have to operate and which obligations you may become liable for. A business that is already trading is only the starting point for your due diligence.