Contract terms and renewals when franchising a business in Argentina

When turning an existing business into a franchise, the contract term should not be treated as a standard clause that nobody reviews. It determines how long the parties will have to develop the outlet and what happens when the agreement expires. In franchising, a well-planned renewal provides predictability. This guide explains how to organise that timetable before offering your first franchise in Argentina.

1. Start with the statutory term, not a commercial preference

In Argentina, franchise agreements are specifically governed by Articles 1512 to 1524 of the Argentine 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. Agreeing a shorter term does not circumvent that minimum where it applies.

Article 1516 itself allows a shorter term in special circumstances, such as trade fairs or conferences, or activities carried out within sites or developments whose duration is shorter. This is not general permission to offer short contracts because the franchisor wants to “test” the franchisee.

For example, an outlet set up to operate during a temporary event requires a different assessment from a permanent shop. Any exception must reflect the actual circumstances and be properly substantiated with legal advice.

It is also important to distinguish between sources: draft legislation published on an official website is not the same as legislation in force. Do not include obligations described as legal requirements merely because they appear in a regulatory proposal.

2. Align the agreement, investment and lease

The statutory minimum is a starting point, not a guarantee of commercial viability. Before choosing the term, prepare a summary of the commitments underpinning the operation:

• Initial investment: building work, fit-out and equipment needed to open.
• Availability of the premises: the lease term and realistic prospects of remaining there.
• Useful life of assets: anticipated replacements and significant maintenance.
• Finance: repayment dates for debts incurred to launch the outlet.
• Planned upgrades: changes to branding or technology that may require further investment.

Look for mismatches. If the lease ends before the franchise agreement, consider how to secure continuity and what procedure to follow if the outlet needs to relocate. The franchise agreement does not, by itself, extend the right to occupy the premises.

Nor is it advisable to require a major refurbishment close to expiry without clarifying the prospects for continuation. Define how these investments will be communicated, who will assess them and how they will be coordinated with any renewal. The contract term must not be presented as a promise that the investment will be recouped.

3. Understand extensions before drafting renewal provisions

Article 1516 provides that, on expiry, the agreement is deemed tacitly extended for successive one-year periods unless either party gives express notice of non-renewal at least thirty days before the relevant expiry date. On the second renewal, it becomes an agreement of indefinite duration.

This makes it risky to file away the signed agreement and review it only when someone wants to leave. Continuing to operate may have legal consequences even if no new document is signed.

Article 1522 also contains rules on termination and notice that must be considered alongside Article 1516. Do not assume that thirty days’ notice covers every situation in which an agreement ends. Seek a legal review of the applicable notice period, the contractual history and the consequences of failing to give notice.

Separate three decisions: continuing under an extension, negotiating new terms or ending the relationship. If changes are planned, document their scope and effective date using the appropriate legal instrument. Do not assume that a commercial discussion automatically amends the agreement.

4. Create a timetable for decisions and supporting records

Before taking on franchisees, appoint someone to manage the contract timetable. Each outlet should have a record of the signing date, the start of the term, the expiry date, extensions, communications sent and evidence of receipt.

Schedule an internal review sufficiently far in advance to assess continuation, outstanding investments and the availability of the premises. This administrative review does not replace statutory or contractual notice deadlines.

Use a short checklist: decision approved, legal review completed, communication prepared, recipient verified and receipt documented. If negotiations are under way, record them without treating them as an agreed extension or valid notice.

Practical conclusion: before offering your franchise, align the contract term, premises and investments, and put a renewal timetable in place. Managing expiry dates from the outset prevents a decision that matters to both parties from depending on a last-minute reminder.