Reserving a franchise in Argentina: what to check before paying

Reserving a franchise may seem like a minor step towards buying one, but it already involves committing money and may create obligations. Transparent negotiations in the franchise sector should allow you to understand what you are paying for before transferring any funds. This guide focuses on that first payment: how to document it, which terms to negotiate and what to check so that you do not confuse a reservation with a binding franchise agreement.

1. Identify the commitment you are making

A ‘reservation fee’ (reserva), ‘deposit’ (seña), ‘advance payment’ (anticipo) and ‘initial franchise fee’ (derecho de ingreso) do not necessarily mean the same thing. The document’s title is no substitute for reading its terms: even a short form may include confidentiality obligations, penalties or a commitment to enter into the final agreement.

Before paying, ask for a document that answers these questions:

• Who receives the money? It should state their name or registered business name, CUIT (Argentine tax identification number), address and the capacity in which they are acting.
• What do you receive in return? This might be a temporary pause in negotiations with other candidates or an assessment of your application. Do not assume that any particular service or benefit is included.
• How long does the commitment last? Specify an expiry date and what happens if no agreement is signed.
• Will the payment be deducted from the initial franchise fee? Make this explicit, along with how the payment will be treated if the transaction does not proceed.

If an intermediary collects the money, check that they are authorised to receive the payment and set its terms. Keep proof of payment and insist on a receipt: a bank transfer proves that money has moved, but does not, on its own, explain everything agreed.

2. Require information before committing yourself

Argentina has specific rules governing franchise agreements in Articles 1512 to 1524 of the Argentine Civil and Commercial Code. These transactions should not be assessed as though they were governed solely by commercial practice.

Article 1514(a) requires the franchisor, before the agreement is signed, to provide economic and financial information covering two years of performance by units similar to the one being offered, which have operated for a sufficient period, either in Argentina or abroad.

This is neither a guarantee of profitability nor an automatic entitlement to every document you request. However, a reservation should not be used to lock you into irreversible commitments before you can assess the proposal. Negotiate terms that make your final decision conditional on receiving and reviewing the information and draft agreement with your advisers.

Do not confuse proposed legislation with rules currently in force. The provisions cited above do not establish a general twenty-day waiting period before any payment, nor do they create a Register of Franchising Companies. The inclusion of such requirements in a published bill is not enough to make them binding.

Negotiations are also subject to the duty of good faith under Article 991 of the Code. This does not oblige either party to complete the transaction, but it does require them to avoid conduct that unjustifiably frustrates the negotiations and causes harm within the meaning of the law.

3. Agree in writing when the money will be refunded

Article 1059 of the Code provides that a deposit, known as señal or arras, is treated as confirmation of the transaction unless the parties agree on a right to withdraw. Where that right is agreed, the party who paid the deposit forfeits it if they withdraw; if the recipient withdraws, they must repay twice the deposit.

For this reason, do not assume that every deposit is refundable or that forfeiting it releases you from every commitment. A lawyer should establish the legal effect of the specific document.

It is useful to distinguish between three situations:

• You decide not to proceed, without either party being in breach: agree whether the money will be refunded, partly retained or forfeited in full.
• An agreed condition is not met: for example, the franchisor rejects your application. Specify whether a full refund is due.
• The other party breaches its obligations: define the process for making a claim, rather than treating this as a simple change of mind.

For each scenario, specify the refund deadline, currency, payment method and any deductions. If assessment costs are to be retained, ask for them to be itemised, capped and supported by evidence. Avoid open-ended wording such as ‘administration costs to be determined’.

4. Arrange a review before transferring funds

Request the reservation document, draft agreement and any referenced schedules or annexes together. This will help you spot whether the reservation document states that you already know or accept terms you have not yet received.

Also keep the commercial proposal and relevant correspondence. If you have been promised a full refund or that the payment will be credited against the franchise fee, include this in the document: do not rely on a verbal explanation that contradicts what you sign.

Finally, have the commitment reviewed by a professional with franchise experience before making the payment. Pressure to pay immediately is no substitute for that review.

Practical takeaway: only reserve a franchise once you can explain what the payment buys you, what obliges you to proceed and how you will recover your money if the agreed refund conditions are met.