Franchising in Argentina: contract duration and renewal

Before joining a franchise network, you need to know how long you will be able to operate and on what terms the relationship will continue. The contract term is not a minor detail: it determines the time available to recoup your investment. Argentina has specific rules, but there are also dates, notice requirements and financial conditions worth clarifying before you sign.

What Argentine law says about contract duration

Franchise agreements are governed by Articles 1512 to 1524 of Argentina’s Civil and Commercial Code. On duration, Article 1516 refers to the first paragraph of Article 1506: the general rule is a minimum term of four years. If a shorter term is agreed, or no term is specified, that statutory minimum applies.

However, Article 1516 itself allows a shorter term in certain circumstances. These include, for example, trade fairs or conferences, and activities carried out within sites or developments whose expected lifespan is shorter.

So, if you are offered a short-term agreement, ask for an explanation of the specific circumstances that justify the exception. It is not enough to describe a short term as the brand’s usual commercial practice. A lawyer should assess whether the case falls within the statutory exception.

Also check when the term starts running. If the agreement begins on signing but the business opens months later, part of the term will pass without any sales. Make sure this gap is clear before committing your investment.

How extensions work and which notice requirements to check

Article 1516 provides that, on expiry, the agreement is deemed to be tacitly extended for successive one-year periods unless either party expressly gives notice to the contrary at least 30 days in advance. On the second renewal, it becomes an agreement of indefinite duration.

An indefinite term does not guarantee that the relationship will continue permanently. Nor should you assume that the 30-day notice period is the only rule governing every decision not to continue. Article 1522 contains provisions on termination and notice that must be considered alongside Article 1516 and the circumstances of the relationship.

Before signing, ask for a written explanation of the proposed mechanism and review it with your adviser. The aim is to distinguish between three situations: expiry of the initial term, annual extensions and continuation for an indefinite period.

Create a calendar showing:

• The signing date and the date the contract term begins.
• The initial expiry date and the expiry dates of any extensions.
• The notice period required for each communication.
• The agreed addresses, recipients and methods for serving notices.

A conversation with the sales representative does not necessarily replace formal notice under the agreement. Keep all communications and proof of receipt.

Compare the contract term with your planned investment

The statutory minimum does not guarantee that you will recoup your investment within that period. To make your decision, compare the time available under the agreement with a budget that allows for opening, starting operations and establishing the business.

Ask your accountant to distinguish between recovering the initial investment and monthly profitability. An outlet may cover its running costs without yet having recouped the money spent on fitting out the premises, equipment and other set-up costs.

Consider at least these scenarios:

• Opening is delayed, leaving fewer months of actual trading.
• Sales take longer than expected to stabilise.
• A substantial equipment upgrade is required before the agreement expires.
• Continuing the agreement requires a further payment.

Do not base your purchase on a future renewal presented as a certainty. If the project only makes financial sense with several additional years of trading, you need to understand what contractual protection supports that continuation. A commercial expectation is not the same as an established legal right.

Clarify the financial terms for continuing

Ask whether continuing simply involves extending the existing agreement or whether the brand intends to enter into a new one. These are not interchangeable terms: they can have different consequences and require legal review.

Ask for clarity on whether there will be a renewal fee, how it will be calculated and when it must be paid. If there is no such charge, it is worth recording that too. Also check whether refurbishment of the premises or other investment will be required as a condition of continuing, with clearly defined criteria and deadlines.

Be wary of open-ended wording such as “the brand’s prevailing terms” if it does not make clear what could change. Ask for clarification on the process, the information you will receive and the time available to assess any proposal.

Putting this into practice: before buying, bring together the key dates, the extension mechanism and the costs of continuing on a single sheet. Check it against your budget and have it reviewed alongside the full agreement. This will help you make a decision based on a realistic timeframe, rather than a promise of renewal.