Franchising in Argentina: agreeing how to handle disputes

Buying a franchise also means thinking about what would happen if a disagreement arose. An attractive commercial proposition is not enough: you need an accessible complaints procedure, clear deadlines and rules that will not bring the business to a standstill. Within the franchise community, planning how to resolve disputes helps protect your investment and preserve working relationships. This review should take place before you sign, while you can still negotiate.

1. Understand the legal framework and protected rights

In Argentina, franchise agreements are specifically governed by Articles 1512 to 1524 of the National Civil and Commercial Code, which has been in force since 2015. This framework is supplemented by general rules on contracts, good faith and liability, as well as the procedural rules applicable to each dispute.

The contract can set out how complaints are handled, but that does not make every restriction valid. Article 1519 declares certain clauses void, including those that prohibit franchisees from challenging the franchisor’s rights to the trade mark on justified grounds, or prevent them from meeting or forming non-commercial relationships with other franchisees.

A confidentiality obligation should therefore not be used as a blanket ban on those relationships. Equally, this does not authorise you to disclose trade secrets: your lawyer will need to distinguish between protected information and the legitimate exercise of your rights.

Do not assume that buying a franchise makes you a consumer. Franchise agreements are usually entered into for business purposes; whether consumer protection rules apply requires a case-by-case assessment and should not be treated as the automatic basis for your protection.

2. Turn informal complaints into a clear procedure

A promise such as ‘we can sort out any problem by talking’ is of little use when your point of contact changes. Ask for the contract to identify who receives complaints, how they should be submitted and what evidence confirms receipt.

It is worth distinguishing between an operational query and a formal notice of breach under the contract. A message to a sales adviser may not meet the agreed formal requirements for raising a complaint. Check the designated addresses for notices, the permitted email addresses and the process for updating them.

Propose a procedure that covers:

• Description of the problem: the obligation concerned, relevant dates and available documentation.
• Acknowledgement of receipt: confirmation that the complaint has reached the person responsible.
• Reasoned response: an explanation and proposed solution within a defined period.
• Remedying the breach: the time allowed and actions required to correct a breach that can be remedied.
• Escalation: involvement of representatives with genuine authority to reach an agreement.

Deadlines should reflect the potential harm. An administrative discrepancy is not as urgent as a failure that prevents the business from operating. Making that distinction clear avoids subjecting every complaint to a waiting period that could jeopardise the outlet’s continued operation.

3. Work out the cost of enforcing the contract

Pay particular attention to clauses on jurisdiction, mediation and arbitration. They determine where, how and at what cost a dispute over a breach would be handled. They are not merely formalities at the end of the document.

If courts in another city are chosen, consider travel, the cost of engaging professionals and difficulties in presenting evidence. The validity of that choice needs to be assessed in the circumstances; do not assume that any court named in the contract will necessarily have jurisdiction.

Mediation aims to help the parties reach an agreement, without the mediator imposing a decision. Whether it is compulsory, and the procedure involved, depend on the jurisdiction and the type of dispute. A private negotiation stage does not automatically replace the legal requirements for bringing a claim.

Arbitration, by contrast, allows arbitrators to decide the dispute. If the contract provides for it, ask for the institution, rules, seat of arbitration, number of arbitrators and arrangements for paying costs in advance to be specified. If you are signing a standard-form contract whose terms you cannot negotiate, request a specific legal review: Article 1651 of the Code excludes disputes arising from such contracts, known as contracts of adhesion, from arbitration agreements, among other exclusions.

Also ask your lawyer to review access to urgent relief. A requirement to negotiate first should not serve as an excuse to prevent court protection where there is an immediate risk.

4. Review penalties, evidence and business continuity

Identify which events can trigger financial penalties, suspensions or the blocking of access to essential tools. Look for definitions that can be assessed objectively: phrases such as ‘conduct damaging to the brand’, without further detail, can lead to disputes that are difficult to anticipate.

Ask whether there is prior notice, an opportunity to explain what happened and a chance to put it right. Also check whether multiple penalties can be imposed for the same event and how each amount is calculated. Do not assume that a disproportionate penalty will automatically be enforceable: it requires legal assessment.

Before signing, make sure you will have access to your supporting documents, communications and operational records. Keep dated versions of the contract and its schedules, while respecting confidentiality and personal data protection requirements. Keeping evidence does not mean recording or sharing information indiscriminately.

Finally, agree how undisputed obligations will continue to be met while the complaint is being handled. Do not stop payments or disregard instructions on your own initiative without advice: you could create a further breach.

Practical conclusion: take your lawyer a sheet setting out five answers: where to raise a complaint, how to give notice, how long to wait, what a dispute would cost and how to keep operating. If any answer depends on a verbal promise, ask for it to be clearly set out before you buy.