Territorial Exclusivity in Franchising in Argentina

When franchising an existing business, allocating a territory involves more than drawing a circle around an outlet. That decision shapes future openings, digital sales and relationships between franchisees. To build a sustainable franchise network, you need to define what protection you offer, where it begins and ends, and how it will work alongside the channels your business already uses.

1. Understand the exclusivity provided by law

In Argentina, franchise agreements are specifically regulated by Articles 1512 to 1524 of the national Civil and Commercial Code. Exclusivity should not be treated as a commercial promise separate from the agreement.

Article 1517 establishes exclusivity for both parties: the franchisor cannot authorise another franchise unit in the same territory without the franchisee’s consent. It also provides that the franchisee must operate from the specified premises, within the allocated territory or, failing that, within its catchment area. The parties may limit or exclude this exclusivity.

In addition, Article 1518(b) provides that, unless otherwise agreed, the franchisor cannot sell the goods or services covered by the franchise directly to third parties within the franchisee’s territory or catchment area.

This means distinguishing between two issues: authorising another franchise and selling through the franchisor’s own business. Reserving the right to make online sales, serve corporate accounts or open company-owned outlets requires a specific contractual review; simply stating that these are different channels is not enough.

Territorial exclusivity is not a guarantee of sales or profitability. It protects against certain actions by the parties, as agreed, but does not eliminate competition from other brands.

2. Define a territory with unambiguous boundaries

Before offering territories, map out where your business currently sells. Include company-owned outlets, home deliveries, repeat customers and corporate contracts. An apparently available territory may contain commercial commitments that you need to resolve before granting rights.

Prepare a territory profile covering:

• Verifiable boundaries: streets, towns, local administrative districts (such as Argentina’s partidos or departamentos) or other precise reference points.
• A map: a dated plan that matches the written description.
• Existing locations: company-owned outlets, franchises and operations already committed to.
• Commercial scope: the activities and formats covered by the protection.
• Proposed exceptions: channels or accounts to be reserved, subject to agreement.

Avoid using vague descriptions such as “the northern area”, “the town centre” or “surrounding areas” on their own. If you use a radius, specify its centre point and how it is measured to avoid discrepancies between straight-line distances and routes along streets.

The territory’s size should reflect potential demand, purchasing habits and service capacity. Do not allocate an entire city simply to secure your first deal: you could constrain future expansion without improving customer service.

3. Address digital sales and cross-boundary transactions

A physical territory does not, on its own, resolve how to handle a purchase that starts on social media and ends with a delivery from another neighbourhood. Before signing, describe typical customer journeys and establish how each will be managed.

For example, a central shop receives an order for delivery to an address within an allocated territory. The agreement should make clear who makes the sale, who prepares the order, who issues the invoice and who handles any return. Any compensation between the parties involved must also be defined.

Pay particular attention to:

• Orders received through the franchisor’s online shop.
• Sales through third-party platforms.
• Collection from an outlet other than the one that received the order.
• Deliveries outside the usual area.
• Corporate customers with multiple branches.

Distinguish the contractually protected territory from the delivery area used for logistics. They may coincide, but they are not the same thing. An outlet’s ability to deliver further afield should not automatically be interpreted as an extension of its territorial rights.

These rules must reflect the agreement and comply with applicable laws, including competition law. Seek legal advice before imposing blanket restrictions on customers or sales.

4. Document allocations and check future openings

Keep a central register of allocated territories, exceptions and consents. Before offering a new location, check it against existing agreements, not just a sales territory map.

Establish a procedure for assessing overlaps: identify the rights affected, review the operational impact and obtain the necessary agreements. A significant change to a territory should not be hidden in an update to the operations manual.

If you intend to make protection conditional on meeting particular targets, define the performance measures, timeframes and consequences with legal advice. Avoid vague wording that allows exclusivity to be withdrawn on the basis of an unpredictable, unilateral assessment.

Putting this into practice: before offering your first territory, prepare a map, a list of existing channels and a matrix assigning responsibilities for each type of sale. Turn these three documents into consistent contractual rules before promising exclusivity.