Buying a franchise in Belgium: assess your purchasing obligations

An attractive franchise brand may prove less profitable if you are required to buy at high prices or hold stock you cannot sell. Yet collective purchasing within a franchise network can also offer benefits, such as consistent quality and better delivery terms. If you are considering buying a franchise in Belgium, look beyond the initial franchise fee. In particular, investigate which goods and services you must buy, on what terms and with what risks.

1. Map out all purchasing obligations

Do not just ask for the supplier list. Read the franchise agreement, its appendices and any clauses referring to an operations manual. Purchasing obligations may be spread across several documents. As well as goods for resale, consider packaging, workwear, point-of-sale software, payment terminals, cleaning products and shop fittings.

Create a single overview showing, for each purchasing category:

• the mandatory supplier and any alternatives;
• the required product range or technical specifications;
• minimum purchase commitments, order quantities and ordering frequency;
• delivery charges, surcharges and payment terms;
• rules on returns, defects and unsold products.

Distinguish between a quality requirement and an obligation to use a particular supplier. A requirement to use packaging with certain properties is different from a requirement to buy it exclusively from one supplier. Ask why exclusive purchasing is necessary and how an equivalent alternative can be approved.

Also check who you are contracting with: the franchisor, an associated company or an independent supplier. This determines whom you can approach if there is a dispute over prices, invoices or deliveries.

2. Calculate the true cost

A price list alone tells you little about your eventual margin. Ask for a representative order breakdown and, where available, anonymised sample invoices from comparable outlets. Discuss recurring additional costs with existing franchisees. Allow for differences in outlet size and order volume.

For each key product, calculate the net purchase price after discounts you can realistically achieve. Add delivery, packaging and other directly attributable costs. Also factor in expected stock losses or spoilage: you will not necessarily sell everything you buy.

Compare figures on the same VAT basis. Margin calculations generally exclude recoverable VAT; ask your accountant to check whether your circumstances require a different approach.

Then test the margin against a realistic selling price, not just the recommended price. Ask how promotions are funded. If you give customers a discount but pay the same purchase price, the difference comes out of your margin. Include turnover-based franchise fees separately so you can also assess the contribution remaining after those fees.

Finally, ask who receives supplier discounts and bonuses. A centrally negotiated saving does not automatically reach you in full. Put in writing which benefits are passed on and how you can check the calculation.

3. Investigate stock and supply risks

A favourable unit price may come with an unfavourable minimum purchase requirement. This is particularly important for seasonal items, products with a short shelf life and packaging that becomes unusable after a change to the product range.

Work through three scenarios: a normal trading period, a disappointing period and a temporary supply disruption. In each case, ask who bears the consequences. Can you order less? Can you return products? Who pays for replacement deliveries or additional transport?

Pay attention to any mandatory opening stock package too. Ask what the quantities are based on and whether they suit your location, storage space and expected customer footfall. A standard package for the whole network will not necessarily suit every outlet.

Discuss with franchisees how shortages and damaged deliveries are handled in practice. Ask for specific examples rather than a general assessment of their satisfaction. Where necessary, negotiate a procedure for temporarily buying elsewhere, including quality requirements and a clear deadline for responding to approval requests.

4. Have the Belgian legal limits reviewed

Belgium does not have a separate, comprehensive franchise law. However, specific pre-contractual rules for commercial cooperation agreements appear in Title 2 of Book X of the Belgian Code of Economic Law (WER), Articles X.26 to X.33. Where these rules apply, you must receive the draft agreement and the pre-contractual information document at least one month before entering into the agreement. Use this period to investigate your purchasing obligations as well.

General contract law, competition law and the rules on unfair terms between businesses in Book VI of the Code also apply. A clause that creates a manifest imbalance in the parties’ legal rights and obligations may be unfair. This does not mean that every strict purchasing condition is automatically prohibited.

Exclusive purchasing is not unlawful in itself either. Its assessment depends, among other things, on the precise restriction, its duration and the economic context. Ask a specialist lawyer to review the combination of purchasing obligations, pricing terms and legal remedies. Do not confuse potential legal protection with a guarantee of commercial profitability.

5. Make the arrangements verifiable before you buy

Have agreed exceptions and procedures included in the contractual documents. A verbal assurance that the franchisor will ‘be flexible’ if stock problems arise offers little certainty. Specify who is responsible, the relevant deadlines and the information used to calculate any financial adjustments.

Practical conclusion: only buy once you can calculate the cost of your mandatory purchases and understand what happens when there is surplus stock, a shortage or a disputed invoice. A strong brand deserves a purchasing model that works for your outlet too.