Franchises in Argentina: how to assess the advertising fund

When buying a franchise in Argentina, the advertising contribution may seem like a minor charge. Yet it is a recurring commitment whose value depends on clear rules: how much you pay, what the money is used for and what information you receive. Across a franchise network, sharing a brand does not mean that every outlet benefits equally from each campaign. That makes it worth examining the fund before signing.

1. Distinguish legal obligations from sales promises

In Argentina, franchise agreements are governed by Articles 1512 to 1524 of the National Civil and Commercial Code. Article 1515(f) requires franchisees to make the payments they have committed to, including contributions towards market development or technologies associated with the franchise.

This does not create a standard advertising contribution across all brands: the amount and operating rules must be set out in the agreement. Nor does it guarantee sales or, in itself, establish a detailed system for reporting on the fund.

Separately, Article 1514(a) requires the franchisor, before signing, to provide economic and financial information covering two years of performance by outlets similar to the one being offered that have been operating long enough to provide that information. This obligation should not be confused with an automatic right to audit every advertising expense across the network.

Ask for advertising promises to be documented in the agreement or in a schedule forming part of it. A sales presentation is no substitute for clear rules on management and oversight.

2. Establish how much you will pay and how it is calculated

Distinguish between three charges: franchise royalties, contributions to the shared fund and advertising you must arrange yourself. All three may apply and serve different purposes.

When reviewing the contribution, look for explicit answers to these questions:

• Is it a fixed amount, a percentage of sales or a combination with a monthly minimum?
• Does the calculation base include VAT, returns, discounts and cancelled sales?
• How are transactions through platforms that deduct commission treated?
• When do payments begin: on signing, opening or making the first sale?
• Is there an additional launch contribution?
• Who can change the amount, and through what procedure?

If the contribution can be adjusted, identify the mechanism, frequency and notice period. Avoid open-ended wording such as “according to the brand’s needs” without limits or a defined procedure.

Request a worked example using typical business transactions. The aim is not to forecast profitability, but to check that both parties interpret the payment clause in the same way. Ask your accountant to review the tax treatment too.

3. Define which expenses the fund can cover

A fund may finance national campaigns, audiovisual production, social media management, agencies or digital tools. Do not assume it will also cover advertising for your outlet.

Ask for a list of permitted uses and exclusions. Pay particular attention to the cost of recruiting new franchisees: expanding the network is not the same as attracting customers to existing outlets. If this use is permitted, it should be expressly stated.

It is also worth establishing whether internal salaries, fees charged by companies connected to the franchisor or administrative costs can be charged to the fund. Request criteria for appointing suppliers and limits on these costs.

Ask whether franchisor-owned outlets contribute and on what terms. Do not assume contributions are equal: check how the system is organised and what it means for new franchisees.

Finally, ask what happens to unspent balances: whether they are carried forward for future campaigns, how they are reported and who decides how they are used.

4. Negotiate reporting and local coordination

Propose regular reporting showing income, expenditure by category, outstanding commitments and the available balance. Depending on the size of the network, this could be supplemented by an annual budget and a process for reviewing supporting documents, subject to confidentiality.

Do not confuse transparency with a right of veto: receiving information does not mean approving every campaign. The agreement should distinguish who manages the fund, who makes decisions and how franchisees can submit comments.

For local advertising, define:

• Any compulsory minimum spend and whether it is payable in addition to the shared fund contribution.
• Permitted channels and the procedure for approving advertising materials.
• The franchisor’s response deadlines.
• Responsibility for advertised discounts and promotions.
• The campaign performance reports available to each outlet.

Ask existing franchisees whether they receive these financial reports and whether approvals arrive on time. Look for concrete examples, not just general opinions.

Practical conclusion: before signing, bring together the contribution formula, permitted uses, rules for changes and agreed reporting requirements in a schedule to the agreement. If any of these remain undefined, review them with a specialist lawyer: a shared fund needs verifiable obligations, not promises of visibility.