Franchising in Colombia: check mandatory purchasing requirements

Buying a franchise can involve more than paying a franchise fee: you may also be required to buy supplies, equipment or stock from specified suppliers. Across franchise networks, these conditions help maintain consistent standards, but they also create dependency. Before signing, make sure you understand what you must buy, who can change the terms and what happens if supplies are disrupted.

1. Identify the scope of mandatory purchasing requirements

Simply asking whether there is an exclusive supplier is not enough. Request a written list of purchases subject to restrictions and the document that establishes each obligation: the contract, a schedule, the operations manual or a supply agreement.

Distinguish between three arrangements:

• Buying directly from the franchisor: the same company grants the franchise and sells the products.
• Designated supplier: you must buy from a third party chosen by the brand, which may have links to the franchisor.
• Approved supplier: you can choose from several companies that meet predefined specifications.

The distinction matters. If there is only one authorised source, your business will depend on its prices, delivery capacity and credit terms. If there are approved suppliers, check whether you can genuinely switch between them without further authorisation.

Also ask for the categories covered to be specified. A requirement covering essential ingredients should not automatically be interpreted as an exclusive purchasing obligation for packaging, uniforms, cleaning supplies or furniture.

Useful document: a table listing each product, its authorised supplier, minimum order, delivery lead time, payment terms and permitted alternative. Ask for it to be included as a schedule to the contract, with a clear procedure for updating it.

2. Check how prices and order requirements are set

An initial price list does not explain how the relationship will develop. Ask who can change it, how much notice they must give and what happens to orders already accepted. Seek agreement that updates will be communicated through a verifiable channel and will not retrospectively affect confirmed orders.

To compare proposals, use the same basket of products on equivalent terms. Include transport, applicable taxes, insurance, storage and any discounts. A lower unit price may offer poorer value if it requires you to take quantities you cannot use before their expiry date.

Pay particular attention to:

• Minimum orders: whether these are calculated per product, delivery or period.
• Mandatory stock levels: who sets the quantities and how they are adjusted to local demand.
• Seasonal stock: whether unsold product lines can be returned or exchanged.
• Products nearing expiry: the minimum remaining shelf life required on receipt.
• Discounts and incentives: who receives them and whether they benefit the franchisee.

You can ask for transparency about financial links and commissions between the franchisor and suppliers. Do not assume you have an automatic right to see all their commercial agreements: negotiate what information must be provided and how it will be verified.

3. Agree how shortages and defects will be handled

An exclusive purchasing requirement must be considered alongside the supply obligations. If you must buy only from a particular company, but no one commits to delivering, the allocation of risk is unbalanced.

Ask for rules covering order confirmation, lead times, partial deliveries and notification of shortages. For defective goods, specify how the problem must be documented, how long you have to make a claim and who is responsible for collection, replacement and transport costs.

Negotiate a temporary alternative purchasing mechanism. This may require substitute supplies to meet technical and health specifications, but it should state who approves them, within what timeframe and what urgent procedure applies if there is no response. Do not treat silence as authorisation unless this has been validly agreed.

If the supplier is a third party, check that its commitments are recorded in a document that is binding on it. A franchisor’s promise that “the supplier always delivers” is no substitute for enforceable supply terms.

4. Understand the legal protection available in Colombia

As Colombia’s Ministry of Justice explains, a franchise in Colombia is an atypical contract: there is no specific law comprehensively governing this relationship. Nor is there a general obligation to provide a franchise disclosure document in the format and within the time limits required in some other countries.

This does not mean there is no protection. The general rules on contracts and obligations in the Commercial Code and Civil Code apply. Article 863 of the Commercial Code requires parties to act in good faith, without fault, during pre-contractual dealings; Article 871 requires contracts to be performed in good faith.

Supply restrictions must also comply with competition rules, including Law 155 of 1959, Decree 2153 of 1992 and Law 1340 of 2009. An exclusivity arrangement is not automatically unlawful: its assessment depends on its terms and effects. Seek independent legal advice before accepting broad restrictions or unilateral changes.

Practical conclusion: before signing, document the scope of mandatory purchasing requirements, the pricing rules and an alternative arrangement for shortages. Trust across franchise networks is stronger when everyone’s supply responsibilities are clear.