Franchise or trade mark licence: how to tell the difference in Argentina

Giving someone permission to use a trade mark does not, in itself, amount to franchising a business. Equally, calling an agreement a “licence” does not avoid franchise obligations if what you are providing is a complete business system. Before entering Argentina’s franchise sector, you need to identify what you are actually offering and which commitments you are prepared to fulfil.

1. Identify what you are providing beyond the trade mark

The first question is not what to call the contract, but what the agreement will enable the other party to do. A trade mark licence authorises the use of a distinctive sign under specified conditions. It may include quality controls without automatically making the relationship a franchise.

By contrast, Article 1512 of Argentina’s Civil and Commercial Code describes a commercial franchise as the right to use a proven system to market goods or services under the franchisor’s trade name, emblem or trade mark. That system includes technical know-how and ongoing technical or commercial assistance, in exchange for direct or indirect consideration.

To review your proposal, answer these questions in writing:

• Are you authorising only the use of the trade mark, or also a specific way of operating?
• Are you transferring proprietary know-how that enables the business to be replicated?
• Will the other party receive procedures, tools and ongoing assistance?
• Is there consideration in return, even if it is not described as a fee or royalty?

What matters is the relationship as a whole, not a single word. The presence of a trade mark, a set of instructions or a payment does not, on its own, determine the legal classification.

2. Check your proposal against Argentine regulations

Argentina does have specific legislation governing franchise agreements: the Civil and Commercial Code, enacted by Law No. 26,994, covers them in Book Three, Title IV, Chapter 19, Articles 1512 to 1524.

This has practical consequences. If the agreement constitutes a franchise, simply drafting permission to use a trade mark is not enough. The franchisor’s obligations under Article 1514 include transferring technical know-how, supplying an operations manual and providing technical assistance throughout the contract term.

Before signing, the franchisor must also provide economic and financial information covering two years of performance by units similar to the proposed franchise, which have operated for a sufficient period in Argentina or abroad. This is not a promise of profitability, but a disclosure obligation that must be properly fulfilled.

Article 1512 also requires the franchisor either to hold exclusive ownership of the rights involved or to be entitled to use them and grant them to the franchisee under the terms of the contract.

Do not confuse these rules with legislative proposals or with what are known in Spanish as “franquicias tributarias”: the latter are tax concessions, not the contractual framework for replicating a business. Any legal review should start with the legislation in force and the specific substance of the agreement.

3. Identify inconsistencies before offering the business

A common problem arises when the commercial offer promises a complete business package, but the contract limits the service to permission to use the trade mark. Another occurs when the document requires the entire operation to be replicated, even though the provider has not put arrangements in place to transfer the system or support its implementation.

Prepare an internal table with three columns: what you promise, what you deliver and what obligations you assume. Include your sales presentation, messages sent to prospective partners and draft contract. They should all describe the same relationship.

For example, if you offer proprietary recipes, customer service procedures, management methods and ongoing support under your trade mark, you should seriously consider whether the arrangement qualifies as a franchise. If you authorise the use of a trade mark for certain products without transferring a business system, the arrangement may be more appropriately assessed as a licence.

These are illustrative examples, not automatic conclusions. Nor does the absence of an initial fee rule out a franchise: the legal definition allows for indirect consideration. Seek professional advice to review how the relationship works financially as a whole.

4. Decide on the format before attracting prospective partners

Classification should come before marketing. If you want to franchise, check that you can provide a proven system and meet the corresponding obligations. If you only want to license a trade mark, define the authorised uses, controls and services precisely, without promising a structure you will not provide.

Before proceeding, put together a description of the model, an inventory of the know-how to be transferred, the support arrangements and the payment structure. Ask a professional to review these elements alongside the contract: looking only at its title misses the essentials.

Practical conclusion: first describe the actual relationship, then choose the legal instrument. A clear proposal protects both parties and helps build sustainable relationships within the franchise sector.