Franchise transfers in Argentina: how to prepare the agreement

When preparing to franchise your business, you also need to plan for what happens if a franchisee wants to sell their unit. An orderly exit protects business continuity, avoids promises that cannot be kept and gives the franchise network greater certainty. The key is to agree from the outset what can be transferred, on what terms and whose approval is required.

1. Distinguish between selling the business and assigning the agreement

Selling equipment, transferring a business as a going concern and assigning a franchise agreement are not equivalent transactions. Buying furniture, fixtures or stock does not automatically give the buyer the right to use your brand and business system.

In Argentina, franchising is specifically regulated by Articles 1512 to 1524 of the National Civil and Commercial Code, enacted by Law 26,994 and in force since August 2015.

Article 1518(a) provides that, unless otherwise agreed, a franchisee may not assign their contractual position or rights arising from the agreement, except for monetary rights. The possibility of transferring the unit must therefore be addressed expressly: it should not be left to an informal business discussion.

If the transaction also involves transferring a business as a going concern, Law 11,867 and its creditor protection procedures must be considered. The franchisor’s approval does not replace those requirements or, on its own, resolve employment, tax, lease or licensing issues.

2. Draft a clause with conditions that can be verified

A useful clause does more than state that approval is required. It also explains how to apply and what will be assessed. This reduces uncertainty both for a franchisee seeking to exit and for a prospective buyer.

Before drafting the clause with legal advice, define:

• Transactions covered: assignment of the agreement, sale of the business as a going concern and, if agreed, changes of control in the franchisee company.
• Required documentation: the buyer’s identity, background, financial capacity and proposed management structure.
• Approval conditions: training, compliance with operational requirements and the ability to keep the business running.
• Treatment of outstanding obligations: debts, claims and commitments made before the transfer.
• Response procedure: how applications must be submitted, who is responsible and the contractual deadline for responding to a complete application.

Do not confuse a change of shareholders with an assignment: the company party to the agreement may remain the same. If you want to review changes of control, the agreement must address them separately.

It is also advisable to document the reasons for approval or rejection. Clear, consistently applied criteria are easier to defend than an improvised decision made when a buyer appears.

3. Set out what must happen before approval

The selling franchisee should not promise that the franchise can continue under new ownership before approval has been granted. Prepare a simple instruction: every sale proposal must make clear that continued operation under the franchise depends on following the relevant contractual procedure.

Organise the review into three stages:

First, identify the transaction. Will the sale cover assets, shares or other ownership interests, or the entire business? Will the existing agreement continue, or is a new one proposed? These options are not interchangeable and may have different consequences.

Next, assess whether the business can actually continue operating. Check the status of the lease, licences and permits, equipment and outstanding obligations. Establish which third-party consents are needed. Commercial approval does not guarantee that the buyer can legally occupy the premises.

Finally, document completion. The document must specify the effective date, who assumes each obligation and whether the outgoing franchisee is released from liability, and to what extent. Do not assume that assignment wipes out debts or discharges personal guarantees.

If a new agreement is to be signed, any applicable pre-contractual obligations must also be met. Do not present it as a simple name change to avoid legal scrutiny.

4. Prepare for a seamless handover

Approval should be accompanied by a brief handover plan. Assign responsibility for taking an inventory of assets, recording outstanding customer matters and coordinating access to systems.

Do not share personal passwords or transfer customer databases without reviewing data protection obligations. Identify which accounts belong to the business, which are managed by the franchisor and which need to be closed or reassigned.

Keep a record of the new operator’s training, the handover of documentation and the date from which they must report on operations. Notify suppliers and customers of the change where appropriate, without promising that all previous obligations will disappear.

Putting it into practice: before offering your first franchise, prepare an assignment clause, a document checklist and a handover record. Review them with local professionals: a well-designed exit process also strengthens the foundations for joining the network.