Managing Supply When Franchising a Business in Argentina

A business may run well with its owner personally handling purchases, yet still be unprepared to supply several franchise outlets. Before expanding, those day-to-day decisions need to become clear rules: what to buy, from whom, on what terms and what to do when an essential item is unavailable. Across a franchise network, reliable supply protects both the customer experience and each outlet’s ability to keep operating.

1. Decide which purchases need central control

Not all supplies warrant the same level of control. A proprietary formulation, packaging that preserves the product or a material essential to delivering a service may require strict specifications. Other items can be bought locally without changing what the business offers.

Create a purchasing matrix with three categories:

• Exclusive products: items that can only be obtained from the franchisor or an authorised source for reasons related to the franchise system.
• Supplies with technical specifications: items that can be sourced from different suppliers, provided they meet verifiable requirements.
• Unrestricted purchases: items that do not affect the brand’s essential attributes and can be left to the franchisee’s discretion.

For each category, record the required quality, format and packaging, storage requirements, delivery lead time and goods receipt procedure. Avoid imposing a supplier simply out of habit: the requirement should address a specific business need.

For example, a coffee shop might control the coffee used and the specifications of its cups without necessarily centralising purchases of all cleaning supplies. The decision must also take account of applicable health and hygiene requirements.

2. Reflect the arrangements in the contract, with legal support

Argentina specifically regulates franchise agreements under Articles 1512 to 1524 of its Civil and Commercial Code (Código Civil y Comercial de la Nación), enacted by Law 26,994. Franchise agreements should not be treated as contracts without their own regulatory framework, nor should legislative proposals be confused with obligations already in force.

Article 1514(e) is particularly relevant to supply: where a franchise includes the provision of goods or services by the franchisor or third parties it designates, the franchisor must ensure that they are supplied in adequate quantities and at reasonable prices, in line with local or international commercial customs and practices.

Appointing a supplier should therefore not become a way of distancing the franchisor from responsibility for supply. Before promising coverage, check production capacity, logistics reach and commercial terms.

The contract should specify:

• Who sells, who issues invoices and who delivers.
• Which purchases are mandatory and which allow alternatives.
• How prices, freight charges, minimum orders and payment terms are communicated.
• How shortages, defective products and returns are handled.
• What procedure allows an exceptional substitute to be authorised.

If the franchisor earns revenue from selling supplies, that commercial arrangement should be made explicit. A margin on products is not the same as a royalty: each needs a clear definition. The legal review should also consider the rules applicable to the product and the agreed purchasing restrictions.

3. Check that suppliers can support expansion

A supplier’s ability to serve the original outlet well does not prove that it can supply a franchise network spread across several cities. Assess its capacity before making its use mandatory.

Ask for specific information on geographical coverage, delivery frequency, available capacity, seasonal variations and complaints handling. Where relevant, check operating licences and health and hygiene documentation. You also need to know which parts of delivery depend on external transport providers.

Run a test order through the full process: ordering, confirmation, preparation, dispatch, receipt and, if necessary, return. The aim is not just to check that the goods arrive, but to establish their total delivered cost to the outlet. An attractive price may lose its appeal once transport, storage requirements or excessive minimum orders are factored in.

Document the supplier’s commitments separately from the franchise agreement. Promising deliveries to franchisees without securing equivalent commitments from the supplier creates an operational gap that is difficult to sustain.

4. Prepare a response to shortages

Supply arrangements need a contingency procedure, not improvised decisions made through messaging apps. Identify the supplies whose absence would halt operations and define alternatives before a problem arises.

For each critical item, establish who receives the alert, who authorises a substitute and what evidence the franchisee must provide. Demonstrating equivalence may require a technical data sheet, a sample or a performance test; looking similar is not enough.

Distinguish temporary authorisation from a permanent change. Record the reason, the outlets covered and the duration of the exception. If there is no safe substitute consistent with the business offering, specify which product or service must be suspended and how customers should be informed.

Practical conclusion: before offering your first franchise, complete the purchasing matrix, test an actual delivery and agree on a procedure for handling shortages. Supply must work without relying on the owner to deal personally with every order.