Confidentiality When Franchising a Business in Argentina

Turning your business into a franchise means sharing what makes it work without losing control of sensitive information. Recipes, production settings and purchasing terms may all form part of that know-how. In a franchise network, trust grows when everyone knows what information they can use, for what purpose and with whom they can share it. Protection starts before you hand over documents, not after you discover a leak.

1. Identify the information that needs protection

Not everything you know about your business is confidential. Published menus, displayed prices and outlet locations are publicly available information. By contrast, an undisclosed formula, an internal calculation method or particular terms negotiated with suppliers may need protection.

Prepare a simple inventory with four fields: information, person responsible, authorised recipients and when it will be shared. This helps distinguish what is needed to present the opportunity from what is only needed by someone who is going to operate an outlet.

You can organise it into three levels:

• Public: a description of the concept, its track record and the general features of the format.
• Restricted to evaluation: investment breakdown, relevant financial data and proposed commercial terms.
• Restricted operational information: complete recipes, technical settings, proprietary procedures and access credentials.

Do not keep shared passwords in general-access folders. Each user should have their own access credentials. Nor should you hand over customer databases as though they were simply operational know-how: personal data requires specific handling under Argentina’s Personal Data Protection Act, Law No. 25,326.

2. Understand what Argentine law requires

Argentina has specific franchise legislation: Articles 1512 to 1524 of the national Civil and Commercial Code, approved by Law No. 26,994 and in force since 1 August 2015.

Article 1515(d) requires franchisees to keep confidential the restricted information forming part of the technical know-how transferred to them, and to ensure confidentiality among anyone to whom they must disclose it to run the business. This obligation continues after the contract expires. Having only the business owner sign is therefore not enough if information then circulates among staff without controls.

Protection also applies before the contract is signed: Article 992 establishes duties concerning information supplied in confidence during negotiations. A written agreement helps identify that information and specify permitted uses; it does not replace practical safeguards.

Confidentiality does not justify withholding information that must be disclosed. Article 1514(a) requires the franchisor, before signing, to provide economic and financial information covering two years of performance at outlets similar to the one being offered, which have operated for a sufficient period in Argentina or abroad.

Also, do not confuse proposed legislation with current law: the bill proposing a Register of Franchisor Companies and disclosure of documents twenty days in advance does not, in itself, establish that these requirements are in force.

3. Prepare a practical agreement before opening your files

Seek legal advice to tailor the confidentiality agreement to your business. Avoid a template that labels every exchange as secret without distinguishing between different types of content.

The document should specify:

• Purpose: evaluating the franchise, without authorisation to put the know-how received to commercial use.
• Information covered: identifiable categories and a method for marking confidential documents.
• Permitted recipients: for example, advisers who need to see the information and are bound by confidentiality obligations.
• Exclusions: information that is public or was legitimately known beforehand, among other justified exceptions.
• Return or deletion: what happens when negotiations end, allowing for any legally required retention.
• Incidents: whom to notify and what immediate steps to take if unauthorised access occurs.

Also set out how to respond to a request from a court or competent authority. The agreement must not prevent compliance with legal obligations. Keep a record of the versions supplied and their recipients.

4. Make confidentiality part of everyday practice

Once the contract is signed, assign access according to roles. Someone managing purchasing does not necessarily need to know a complete formula; someone handling production may not need access to negotiated financial terms.

Use controlled document repositories and record significant disclosures. When staff change, review permissions and revoke any that are no longer appropriate. Agree with the franchisee how they will extend these obligations to their staff, without confusing the franchisee’s status as an independent business with an employment relationship with the franchisor.

When the relationship ends, follow a closure checklist: block accounts, recover storage media, document returned materials and confirm how copies will be handled. Do not promise complete deletion where this cannot be verified; define procedures that can be checked.

Putting it into practice: before sharing your next folder, list the sensitive documents, decide who may receive them and review the agreement with a lawyer. Effective protection combines clear rules, responsible disclosure and access controls.