The franchise agreement is a key tool for business expansion. It allows an entrepreneur or company to operate under an already established brand, leveraging its know-how and ongoing support. But how is this type of contract regulated in Argentina? What obligations do the parties have? And how can they protect themselves from potential claims?
In this article, we explore the applicable legal framework and the main features of the trademark franchise agreement in Argentina.
What is a trademark franchise agreement?
According to Article 1512 of the Argentine Civil and Commercial Code (CCyCN), a commercial franchise exists when one party (the franchisor) grants another (the franchisee) the right to use a proven system to market goods or services under its trademark, trade name, or emblem. In exchange, the franchisor transfers technical knowledge, provides ongoing assistance, and receives financial compensation.
Key features of the franchise agreement
The franchise agreement has distinctive elements that set it apart from other contractual arrangements:
- It involves a license—or a set of licenses—of intellectual property rights (such as trademarks, patents, or industrial designs), and therefore the franchisor must hold valid title to those rights.
- The franchisor may not exercise controlling influence over the franchisee’s business.
- The parties are legally independent, which implies:
- There is no employment relationship between franchisor and franchisee.
- The franchisee’s employees have no legal employment relationship with the franchisor.
- The franchisor is not liable for the franchisee’s obligations, unless expressly provided by law.
- The franchisor is not responsible for the profitability of the franchised system.
- Unless otherwise agreed, the franchise is presumed to be exclusive:
- The franchisee may not operate outside their assigned territory.
- The franchisor may not authorize another franchise in the same territory without consent.
- Except in certain specific cases, the minimum term of a franchise agreement may not be less than four years.
Obligations of the parties
In addition to transferring know-how and providing technical assistance, the franchisor’s key obligations include:
- Providing prior financial information about the business (at least two years of performance data from comparable units).
- Delivering a detailed operations manual.
- Ensuring the adequate supply of goods or services, where applicable.
- Refraining from interfering in the franchisee’s business operations.
The franchisee, in turn, must:
- Follow the guidelines set out in the operations manual.
- Provide relevant information about business performance and allow agreed inspections.
- Avoid actions that could harm the brand’s prestige or identity.
- Maintain confidentiality over any proprietary or sensitive information.
Consumer liability
Article 40 of the Argentine Consumer Protection Law provides that if a consumer suffers damages resulting from a defect or risk in a product or service, all parties involved in the supply chain are jointly liable, including “the producer, manufacturer, importer, distributor, supplier, seller, and anyone who has placed their brand on the product or service.”
This means the franchisor could be held liable for damages caused by the franchisee, even without direct involvement. For this reason, it is essential to include comprehensive indemnity clauses in the agreement.
Possibility of registering the agreement
The franchise agreement may be registered with the National Institute of Industrial Property (INPI), as we explain in this article.
Conclusion
A trademark franchise agreement in Argentina requires precise drafting and thorough legal analysis to safeguard both parties’ interests.
At Legal Core Group, we advise franchisors and franchisees on the preparation, review, and negotiation of franchise agreements, ensuring compliance with applicable regulations and proper legal protection.
If you need legal advice to grant or acquire a franchise, contact us.