Confidentiality When Franchising a Business in Argentina

To franchise an existing business, you need to show how it works without giving away all its secrets at the first meeting. Costs, recipes, procedures and commercial terms require different levels of protection. A structured approach to confidentiality allows you to share what prospective franchisees need to assess the opportunity while protecting the know-how that underpins your franchise network.

1. Identify which information needs protection

Before preparing an agreement, draw up an inventory. Simply declaring everything relating to the company confidential is not enough: you need to distinguish public information from information whose disclosure or misuse could harm the business.

You can organise information into three groups:

• Public: the brand’s history, business proposition and general features of the franchise format.
• Confidential, for assessing the investment: cost structures, outlet performance figures and unpublished commercial terms.
• Restricted operational information: formulas, production parameters, internal configurations and procedures that provide a competitive advantage.

For each document, identify who manages it, who may receive it and for what purpose. Avoid including personal data or third-party information that is unnecessary for the assessment.

For example, showing the total cost of preparing a product may be enough to analyse its margin without revealing the full formula at that stage. This distinction should serve a specific need, not be used to conceal financial risks.

2. Understand the applicable legal obligations

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the Argentine Civil and Commercial Code. They should not be treated as contracts without their own regulatory framework.

Article 1515(d) requires franchisees to keep confidential the protected information forming part of the technical know-how transferred to them. They must also ensure confidentiality on the part of anyone, whether an employee or otherwise, to whom they need to disclose it to operate the business. This obligation continues after the agreement ends.

Protection also applies before signing. Article 992 provides that anyone receiving confidential information during negotiations must not disclose it or misuse it for their own benefit. A written agreement helps clarify what is being shared and on what terms, but does not replace statutory obligations.

Law No. 24,766 on the confidentiality of information may also apply where its requirements are met: the information must be secret, have commercial value because it is secret, and be subject to reasonable measures to keep it so. Signing a document without controlling access therefore provides only partial protection.

Nor does confidentiality justify withholding the pre-contractual information required under Article 1514. Protection and transparency must work together.

3. Prepare a practical agreement before sharing documents

The Buenos Aires City Government’s franchise development guide includes a confidentiality agreement among the documents used in dealings with prospective franchisees. To make it useful, tailor it to the information you will actually share.

With legal advice, define:

• Permitted purpose: assessing a potential franchise, without authorising other uses.
• Information covered: documents, files, demonstrations and explanations identifiable as confidential.
• Permitted recipients: the prospective franchisee and advisers who need access, subject to appropriate confidentiality commitments.
• Exclusions: information that is public, lawfully obtained from another source or independently developed.
• Mandatory disclosures: the procedure to follow in response to a legal requirement or court order.
• Return and deletion: how copies will be handled and what may need to be retained to comply with legal obligations.

Distinguish the term of the agreement from the period of protection appropriate to each type of information. Do not confuse confidentiality with non-compete restrictions: preventing disclosure of a recipe is not the same as prohibiting all future commercial activity.

4. Share information in stages and keep records

Plan a disclosure process that reflects the actual progress of discussions. You might share the public presentation first, followed by the financial documents needed for assessment on a confidential basis, and finally the operational material required for implementation.

This process must not delay disclosure of information essential to a decision until after commitments have been made. Prospective franchisees must be able to consult their professional advisers and assess the opportunity thoroughly.

Use individual access credentials, limited permissions and clearly identified document versions. Record what was shared, with whom and when. If you demonstrate procedures during a visit, agree in advance whether photographs or recordings are permitted.

5. Withdraw access when the relationship changes

If negotiations fall through, revoke access permissions and request the agreed return or deletion of information. If the franchise goes ahead, align the earlier confidentiality agreement with the franchise agreement and the commitments made by those who will have access to confidential information.

If you suspect a leak, preserve evidence, restrict compromised access and seek advice before making claims. Avoid accusations until the facts have been checked.

Getting started: select your most sensitive documents, assign responsibility for them and define the conditions for sharing them. Effective confidentiality combines clear obligations, controlled access and the transparency needed to make an informed decision.