Franchising know-how: how to verify your right to share it

A business may perform well yet depend on knowledge its owner does not control: licensed software, a recipe developed by a third party or a method known only to one manager. Before offering franchises in Argentina, check what know-how forms part of the proposition and what rights allow you to pass it on. This review helps you build a franchise network on capabilities you can actually make available, rather than assumptions.

1. Distinguish know-how from general resources

Know-how is the body of practical knowledge that enables someone else to replicate how a business operates. It is not everything included in a manual, nor does it encompass all the experience a company has accumulated.

Argentina’s Civil and Commercial Code governs franchise agreements under Articles 1512 to 1524. Article 1513 characterises the business system in terms of practical knowledge and experience accumulated by the franchisor that is unpatented, properly tested, secret, substantial and transferable.

These conditions provide a practical framework for your review:

• Tested: there is a track record of actual use, rather than just an idea awaiting a trial.
• Secret: the knowledge as a whole, or its particular configuration, is not generally known or readily accessible.
• Substantial: it provides knowledge that is important for selling products or delivering services.
• Transferable: it can be communicated in a way that enables someone else to apply it.

For example, a general instruction to serve customers politely does not, on its own, demonstrate distinctive know-how. An in-house procedure for assessing needs, preparing a service and resolving recurring problems may be a relevant component if it has been tested and can be taught.

The aim is not to declare the entire business secret, but to identify the knowledge that makes its offering replicable.

2. Create an inventory recording origins and evidence

Prepare a dedicated know-how register. Unlike an operations manual, this tool does not explain how to carry out the work: it allows you to check where each component comes from and whether it is available for use within the franchise.

For each item, record:

• Its role within the business.
• Who created it and who updates it.
• Where it is documented.
• The operations in which it has been used.
• The evidence that demonstrates that use.
• The contracts or permissions that support its use.

You can include formulas, workflows, diagnostic criteria, tool configurations or organisational methods. Avoid including customer data unless it is necessary to describe the knowledge.

As practical evidence, retain dated versions, test records, instructions used in practice and training records. These documents help trace the system’s development, but they do not replace contracts or automatically establish exclusive rights.

If a procedure depends on one person’s memory, flag it as an outstanding issue. The fact that this person currently works in the business does not mean the knowledge is already available to pass on to future franchisees.

3. Review employee and supplier rights

Article 1512 requires the franchisor either to hold exclusive ownership of the intellectual property rights, trade marks, patents, trade names, copyright and other elements included in the system, or to have the right to use them and pass them on to the franchisee under the terms of the agreement.

Paying for something to be developed does not, on its own, establish that you can authorise third parties to use it. Your review must take account of the nature of each resource and the applicable agreements.

Pay particular attention to the following:

• Software and digital tools: a licence for your own premises may not allow access by franchisee businesses.
• Materials produced by consultants: check your rights to reproduce, adapt and supply them to third parties.
• Methods contributed by employees or business partners: document their origins and seek advice on the relevant rights; do not assume the same rules apply to every creation.
• Supplier resources: distinguish your own know-how from documentation supplied solely to enable you to use a supplier’s products.

Classify each component as available, subject to authorisation or requiring replacement. Where permission is missing, negotiate its scope before promising access. The legal review should also address what happens if the relationship with the original supplier ends.

4. Resolve outstanding issues before making an offer

Assign each outstanding issue to a responsible person, with an action and a deadline. Options may include obtaining an appropriate licence, documenting permission, replacing a resource or developing your own alternative.

Then cross-check the inventory against the commercial offer and the agreement. A tool should not be advertised as part of the system if franchisees’ use of it still depends on uncertain authorisation.

Also check that permissions cover the intended use throughout the contractual relationship, as well as any necessary updates. Limited permission may jeopardise continued use of the method, even if it is sufficient for opening the business.

Practical conclusion: before marketing your franchise, identify the critical components of its know-how and verify their origins, evidence of use and legal availability. If any component cannot lawfully be passed on, resolve the issue before including it in your offering.