Managing Supply When Franchising a Business in Argentina

A business may run smoothly when its owner handles purchasing personally, yet still be unprepared to supply additional outlets. Before franchising in Argentina, you need to turn those informal decisions into a system that maintains quality, availability and predictable costs. In a franchise network, supply management connects the brand promise with what each customer actually receives.

1. Separate critical supplies from unrestricted purchases

The first step is not to impose a single supplier for everything. It is to identify which products, ingredients, equipment or materials determine the quality of the business, and which can be purchased locally without changing the customer experience.

Prepare a matrix with three categories:

• Exclusive supplies: proprietary components or products made using a specific formula or process.
• Purchases subject to technical specifications: items that different suppliers can provide, as long as they meet verifiable requirements.
• Unrestricted purchases: items that do not affect the identity or performance of the franchise system, subject to basic safety and quality requirements.

For each item, record its specification, purchasing unit, storage requirements, shelf life where applicable, replenishment lead time and the person responsible for approval. Avoid descriptions such as “superior quality”: you need criteria that allow a delivery to be accepted or rejected.

For example, a coffee shop might source its coffee blend from a designated supplier, approve several cup suppliers and allow office supplies to be purchased locally. Every restriction should address a specific need, rather than simply reflect established practice at the original outlet.

2. Understand the legal obligations relating to supply

Argentina specifically regulates franchise agreements under Articles 1512 to 1524 of the Argentine Civil and Commercial Code, adopted by Law 26,994 and in force since 1 August 2015. Franchising should therefore not be treated as a contractual arrangement without its own regulatory framework.

On supply, Article 1514(e) provides that, where the franchise includes the provision of goods or services by the franchisor or third parties designated by it, the franchisor must ensure that they are supplied in adequate quantities and at reasonable prices, in accordance with local or international commercial customs and practices.

This requires assessing suppliers’ actual capacity before committing to new openings. Appointing a third party does not relieve the franchisor of that obligation.

In addition, Article 1519(b) invalidates clauses that prevent a franchisee from purchasing goods covered by the franchise from other franchisees within Argentina, provided those goods meet the quality standards and characteristics specified in the contract. An outright ban on purchasing outside the central distributor therefore warrants particularly careful legal review.

Do not confuse legislative proposals with laws currently in force: the proposal to create a Register of Franchisor Companies does not, in itself, impose a registration requirement. The health, commercial and traceability requirements applicable to each product must be reviewed separately.

3. Document purchasing arrangements, prices and responsibilities

The agreement and its supply schedule should make clear who sells, who invoices, who delivers and who handles complaints. Where several parties are involved, assign responsibilities explicitly.

At a minimum, define:

• Orders: the authorised ordering channel, confirmation process, minimum quantities and cut-off times.
• Prices: the applicable price list, how changes are communicated and how confirmed orders are treated.
• Logistics: transport, costs, receipt of goods and the recording of discrepancies.
• Quality: checks, rejected deliveries, returns and replacement of defective goods.
• Payments: due dates and procedures for late payments or disputes.

Do not confuse the supply price with the retail resale price. Commercial restrictions must also be reviewed under Argentina’s Competition Defence Law 27,442.

If your company earns revenue from distributing supplies, include that margin in the financial analysis of the expansion. An arrangement that looks attractive to the franchisor may be unviable for the franchisee once freight charges, wastage and excessive minimum order quantities are taken into account. Model the full cost of getting goods to the outlet, not just the list price.

4. Plan your response to shortages before opening

A supplier list is not a continuity plan. For each critical item, identify an alternative and define the procedure for authorising its use.

The process might include notification of the shortage, an estimate of remaining stock, assessment of substitutes, written approval and a date for returning to the usual supply arrangements. If there is no safe substitute, specify when sales of the affected product must be temporarily suspended.

Before offering the franchise, verify suppliers’ production capacity, delivery coverage and actual lead times. Then track simple measures: complete deliveries, delays, rejected deliveries and days out of stock. Use them to resolve problems, not just to assign responsibility.

Practical conclusion: before signing your first franchise agreement, complete the supply matrix, verify alternative suppliers and have the supply schedule reviewed by a local lawyer. Do not promise continuity of supply that you cannot yet deliver.