Territory and Exclusivity When Franchising in Argentina

When franchising an existing business, promising an ‘exclusive territory’ sounds straightforward. Problems arise when a company-owned outlet delivers orders there, the online shop sells to the same address or another franchisee wants to open nearby. In franchising, defining the territory helps manage expectations and prevent disputes. This guide explains how to turn that promise into a clear commercial proposition and an agreement that can be applied in Argentina.

1. Understand what Argentine law provides

Argentina has specific franchise legislation: franchise agreements are covered by Articles 1512 to 1524 of the Argentine Civil and Commercial Code, enacted by Law 26,994 and in force since 1 August 2015.

The key provision for defining territories is Article 1517. It establishes that franchises are exclusive for both parties, although that exclusivity may be limited or excluded by agreement. It provides that the franchisor cannot authorise another franchise unit within the same territory without the franchisee’s consent. The franchisee, in turn, must operate from the specified premises, within the allocated territory or, where none is specified, within its catchment area, and may not operate competing units or activities, either directly or through an intermediary.

Exclusivity should therefore not be treated as a marketing phrase: it has contractual consequences. If your proposition includes exceptions, these should be defined and legally reviewed before you offer it.

It is also important to distinguish current legislation from proposed bills. A bill proposing a register of franchisors or a mandatory period for supplying documents in advance does not, in itself, create a current legal obligation. When addressing territorial issues, start with the Code and the specific contract, rather than commercial summaries.

2. Map out a territory you can support

Before allocating entire neighbourhoods or cities, analyse how customers currently reach your business. Separate in-store purchases from home deliveries and business accounts: each may have a different geographical reach.

Prepare a working map showing:

• The locations of company-owned outlets and existing territorial commitments.
• Where customers come from, using aggregated data and respecting their privacy.
• Access barriers, transport routes and actual delivery areas.
• Special locations, such as shopping centres or transport terminals.
• Areas where you plan to open new units.

A large territory does not guarantee a good commercial opportunity. It may include areas that are difficult to serve and prevent future openings without genuinely benefiting the franchisee. Aim for boundaries that match the format’s service capacity.

Then turn the map into a clearly defined contractual schedule, using streets, administrative boundaries or a clearly described polygon. If you choose a radius, specify its centre point and how it is measured. Avoid phrases such as ‘the area around the outlet’, and state which document takes precedence if the map and written description differ.

3. Separate location, order generation and fulfilment

The buyer’s address, the place where an order is taken and the outlet that prepares it may all be different. A clause that merely prohibits another establishment from opening nearby therefore leaves essential questions unanswered.

Create an internal table for each channel: in-store sales, the website, delivery apps and business accounts. Specify who may generate orders, who fulfils them, how revenue is allocated and who handles returns or complaints.

For example, if your online shop receives an order for delivery within the allocated territory, decide in advance whether the franchisee prepares it, a central warehouse dispatches it or it is routed according to available capacity. Any compensation must be expressly agreed, not assumed.

Review company-owned outlets too: do not promise territorial protection while reserving an undisclosed right to compete from an outlet trading under the same brand. Document negotiated exceptions and have them legally reviewed. Restrictions relating to customers, channels and competition must also be assessed against generally applicable laws, including Competition Law 27,442.

4. Turn the design into verifiable commitments

Before presenting the franchise opportunity, make sure the commercial proposal, contract and schedules are consistent. They should all describe the same territorial scope.

The final review should answer:

• Which activities and formats does exclusivity cover?
• Which existing units and channels are included?
• How are new locations or relocations authorised?
• How are incorrectly allocated orders recorded and resolved?
• What procedure allows territorial changes to be agreed?

If you link any territorial rights to targets, define verifiable performance measures, assessment periods and proportionate consequences. Do not include a vaguely worded right to reduce the territory unilaterally.

Putting it into practice: before offering your first franchise, prepare a map, a channel table and a territorial schedule reviewed by a legal professional. If those documents do not allow you to resolve a specific order without a dispute, the agreement still needs to be made more precise.