Insurance When Franchising a Business in Argentina

Before franchising a business, it is not enough to check that your own premises are insured. You need to establish the risks each new unit will face, who will arrange cover and how you will check that it remains in force. A franchise network needs common standards of protection, but these must also reflect the business activity, premises and operating model. This work is best done before offering the first franchise agreement.

1. Separate legal obligations from brand requirements

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the national Civil and Commercial Code. These provisions do not prescribe a single policy or a general insurance package that is compulsory for all franchises.

Specific obligations may arise from other legislation, the business activity, local rules or contracts such as a lease. For example, franchisees with employees must meet the requirements of the occupational risk system governed by Law 24,557. Commercial premises insurance does not replace this protection.

Insurance contracts, in turn, are governed by Law 17,418. A franchise clause requiring a particular type of insurance does not, by itself, change what the insurer covers: the policy and its terms must be reviewed.

Organise requirements into three groups:

• Required by law: depending on the employer, activity and jurisdiction.
• Required by other contracts: such as the lease for the premises.
• Required by the franchise: additional cover justified by the risks of the business model.

Review this classification with legal advisers and a registered insurance intermediary, known locally as a productor asesor de seguros. Do not present a brand-specific requirement as a universal legal obligation.

2. Map the risks in your operations

Use the existing business to identify potential incidents, rather than simply copying its policy. A franchised unit may have a different floor area, higher footfall or different equipment.

Work through each stage of operations: receiving goods, storage, customer service, delivery and closing up. For each stage, record what could happen, who might suffer harm or loss, and which assets or liabilities would be involved.

Types of cover to assess include:

• Public liability: for certain losses or injuries suffered by third parties arising from the business activity, subject to the scope of cover purchased.
• Fire and property damage: for the building, fixtures and fittings, equipment and stock, distinguishing what belongs to each party.
• Theft: checking which assets are included, required security measures and exclusions.
• Loss of profits or business interruption: where appropriate and subject to the circumstances covered by the policy.

These types of cover are not interchangeable. Insurance for damage to equipment does not necessarily compensate for lost sales while it is being replaced. Nor should you assume that a landlord’s policy protects the franchisee’s assets.

The result should be a simple matrix: risk, cover to assess, party responsible for arranging it and evidence required.

3. Set out a contractual schedule that can be checked

Avoid vague wording such as “the franchisee must maintain sufficient insurance”. The agreement or its schedule should make it possible to check exactly what is required and when cover must be in force.

Specify the required cover, the basis for calculating sums insured, liability limits and acceptable excesses or deductibles. These last terms refer to amounts borne by the insured under the policy; the Spanish insurance term franquicia should not be confused with the commercial franchise agreement.

It is also worth specifying:

• Who arranges and pays for each type of cover.
• When cover must begin, including building work or installation where relevant.
• What documents must be supplied before opening and at each renewal.
• How changes, cancellations and claims are reported.
• How often insured values and policy terms are reviewed.

If you intend to include the franchisor as an additional insured, seek advice on whether this is appropriate and what protection it would provide. Mentioning this in the franchise agreement does not add the franchisor to the policy: it must be recorded in the documentation issued by the insurer.

4. Monitor ongoing cover, not just the initial purchase

Appoint someone to maintain a register of policies, expiry dates, proof of payment and relevant changes. Keeping a quotation or commercial proposal does not, on its own, demonstrate that cover is in force.

Before opening, check that the declared business activity, address and insured assets match the actual operation. Repeat this review whenever there are alterations, new services or significant changes to equipment and stock.

Also prepare a brief incident procedure: protect people, limit damage where it is safe to do so, preserve evidence and report the incident through the appropriate channels within the applicable deadlines. Liaising with the brand must not delay notification to the insurer.

In practice: before adding a new unit, finalise three documents: a risk map, an insurance schedule to the agreement and a monitoring calendar. Effective protection depends on the agreement, policy and actual operations being aligned.