Franchises in Argentina: how to agree terms for a future transfer

Buying a franchise also means considering what would happen if you wanted to transfer the business later. A job opportunity, a change in family circumstances or an offer to buy the business could alter your plans. In franchising, selling premises, equipment and stock is not the same as transferring the right to operate under the brand. You should examine that possibility before signing, not when a prospective buyer appears.

1. Understand what Argentine law allows

Argentina specifically regulates franchise agreements in Chapter 19, Articles 1512 to 1524, of its Civil and Commercial Code. Article 1518 is particularly important for a future transfer: unless otherwise agreed, the franchisee cannot assign its contractual position or the rights arising from the agreement, except for monetary rights.

The practical consequence is clear: do not assume that buying a franchise entitles you to sell it freely later. Whether a transfer is permitted, and on what terms, requires an explicit review of the agreement.

It is also worth distinguishing between three different transactions:

• Sale of assets: transferring equipment, furniture or stock does not automatically transfer the franchise.
• Assignment of the contractual position: a new operator takes your place in the relationship with the franchisor, subject to the applicable conditions.
• Sale of shares or ownership interests in a company: ownership of the franchisee company changes, but this may trigger change-of-control clauses.

Ask a lawyer to identify which mechanism applies. Depending on how the transaction is structured, it may also be necessary to consider the business transfer rules under Law 11,867 and other applicable obligations. Not every transfer can be completed simply by obtaining the franchisor’s approval.

2. Negotiate a clearly defined approval procedure

The franchisor may have a legitimate interest in assessing who will continue to operate within its system. However, a clause that merely says ‘subject to approval’ leaves too many questions unanswered.

Before buying, ask for the agreement to specify:

• What background, resources and experience the candidate must demonstrate.
• Which documents must be submitted and who should receive them.
• At what point the application is considered complete.
• How long the franchisor has to respond.
• How approval or refusal will be communicated.
• How long an approval remains valid.

Propose objective criteria and a written response. For example, you could negotiate an assessment based on financial standing, availability to manage the outlet and completion of the required training. These are conditions to agree, not a mandatory statutory checklist.

Do not assume that silence amounts to consent. If you want to specify consequences for a failure to respond, these must be expressly drafted and legally reviewed. It is also worth setting out how an incomplete application can be corrected, to prevent the assessment from remaining pending indefinitely.

3. Clarify which agreement the buyer will receive

A crucial question is whether the prospective buyer will take over your agreement or have to sign a new one. That difference can affect the appeal of the transaction and the buyer’s willingness to proceed.

Ask for written answers to these questions:

• Will the existing terms remain in place for the rest of the agreement’s term?
• Will the new operator have to accept the standard agreement in use at the time?
• Will the transfer be conditional on refurbishing the premises or meeting new operating requirements?
• Who will be responsible for training the replacement operator, and how will it be coordinated?
• Does the franchisor have any right of first refusal to buy the business?

If a right of first refusal is agreed, the terms should clearly specify how the offer must be notified, the documentation required, the deadline for exercising the right and the terms that must be matched. An ambiguous right of first refusal can make negotiations with third parties more difficult.

Also distinguish between approval of the assignment and release of the outgoing franchisee. Do not assume that transferring the agreement extinguishes previous obligations or releases guarantees. The transfer document must specify which liabilities each party retains and what consents are required.

4. Plan a safe sequence for the handover

Approval of the franchise transfer does not, by itself, ensure that the lease, operating licences or employment arrangements will continue. Before committing to a sale, check what additional consents and procedures are required for the outlet.

A prudent approach is to introduce the candidate, obtain the franchisor’s assessment and coordinate the other conditions before completion. If a reservation agreement or preliminary agreement is signed, a professional adviser should set out what happens if an approval is not obtained, how payments will be handled and when the business can be handed over.

Practical conclusion: before buying, ask for a clause that explains who can replace you, how they will be assessed and which agreement they will operate under. A documented route to transferring the business is more useful than a verbal promise that ‘selling later will not be a problem’.