Franchising your business: organising procurement

Turning an existing business into a franchise means creating purchasing arrangements that can be replicated. A supplier that reliably serves your own outlet may struggle when several franchisees place orders at once. Before recruiting franchisees, decide which purchases should be coordinated across the network, where franchisees will have freedom of choice and what happens if supplies run short. The aim is to preserve your franchise network’s identity without imposing unnecessary or legally questionable restrictions.

1. Distinguish essential purchases from those offering freedom of choice

Start with what your business actually buys: products for resale, ingredients, packaging, consumables, equipment and services needed to operate. For each category, ask whether changing supplier would affect quality, safety or the customer experience you promise.

Then classify these purchases under three possible arrangements:

• Mandatory sourcing: a specific product or supplier is essential to the operation of the concept, subject to the legal validity of that requirement.
• Approved suppliers: several suppliers meet common criteria, and the franchisee chooses between them.
• Free choice within specifications: the franchisee selects their supplier, provided they meet objective specifications.

This classification must be based on verifiable reasons. A specific recipe, a traceability requirement or equipment compatibility may justify restrictions. The founder’s established habits alone are not enough to demonstrate that a restriction is necessary.

Prepare a fact sheet for each purchasing category, setting out the required specifications, compliance documents, checks and procedure for proposing an alternative supplier. This will allow you to explain each restriction to prospective franchisees rather than simply presenting a list of obligations without justification.

2. Check the legal framework before requiring exclusive sourcing

In France, franchise agreements are not governed by a single dedicated legal regime. They are subject, among other things, to general contract law, commercial law and French and EU competition law. Franchising therefore does not automatically permit every type of sourcing restriction.

The EU Vertical Block Exemption Regulation, Regulation (EU) 2022/720, is a key reference. Whether an agreement benefits from the exemption depends, in particular, on the parties’ market shares and the nature of the restrictions it contains. Certain obligations requiring the buyer to make more than 80% of its purchases from the supplier or a designated business are treated as non-compete obligations under this regulation.

The duration, scope and necessity of an obligation must therefore be assessed. A clause that does not qualify for the exemption is not necessarily unlawful: it requires an individual assessment. Have the arrangements reviewed by a legal adviser familiar with distribution agreements, rather than simply copying a clause from another contract.

Pre-contractual disclosure also matters. Where its conditions apply, Article L. 330-3 of the French Commercial Code, introduced by the Doubin Law, requires the pre-contractual disclosure document (known in France as the DIP) and draft agreement to be provided at least twenty days before signing or making any advance payment. Article R. 330-1 specifies, among other things, the information to be disclosed about the scope of exclusivity arrangements. Purchasing restrictions must therefore be presented consistently across the documents supplied to prospective franchisees.

3. Test suppliers against the needs of your future franchisees

Do not confuse product quality with reliable logistics. Before rolling out your franchise offering, ask suppliers how they will serve several independently operated outlets with different order volumes, delivery schedules and locations.

Check the following in practical terms:

• minimum order quantities and whether they suit a gradual start-up;
• normal lead times, closure periods and capacity to handle additional demand;
• delivery charges and payment terms;
• how missing, damaged or non-compliant products are handled;
• returns procedures and, where necessary, traceability arrangements.

Test orders that reflect the needs of a new outlet, not just the volumes purchased by your original business. An attractive price may look less appealing once delivery, storage and wastage are taken into account.

Clarify your own role too: will you resell goods, negotiate approved-supplier arrangements or centralise orders? This distinction determines who issues invoices, who bears the risk of unpaid bills and whom franchisees contact with complaints. Document separately the commitments you have actually secured from suppliers.

4. Plan for shortages and make changes clear

A purchasing obligation without a backup option can bring a franchisee’s operations to a halt. Establish a procedure for supply shortages: whom to notify, what supporting evidence is needed, which substitute products are acceptable and how temporary approval is granted.

Also set out how suppliers are added or removed. The criteria should be clear: compliance, delivery capacity, demonstrated quality or repeated failures. Allow a transition period suited to available stock and existing commitments, unless an urgent safety issue requires immediate action.

Finally, explain the financial arrangements associated with purchasing: prices charged, logistics fees and any payments received for granting approved-supplier status. Do not describe the terms as consistently advantageous unless you have a verifiable comparison to support that claim.

Key takeaway: before recruiting franchisees, draw up a purchasing matrix, test deliveries and prepare a backup option. Then have your contractual requirements checked to ensure they match these arrangements precisely.