Franchising in Greece: exclusive purchasing with clear limits

When you turn an existing business into a franchise network, the suppliers you chose for your own outlet do not automatically become mandatory for every franchisee. You need to distinguish between what genuinely protects the network’s shared identity and what is simply a commercial preference. In franchising, purchasing obligations must be understandable, capable of financial assessment and compliant with competition rules.

1. Separate the essential from the optional

Before drafting an exclusive purchasing clause, list everything your existing outlet buys: raw materials, products for resale, packaging, equipment and consumables. For each category, answer one question: what specific harm would buying from another supplier cause?

The answer must be operational, not general. A distinctive product formulation may be directly linked to the business’s identity. By contrast, technical specifications may adequately cover a standard consumable, without requiring a particular supplier.

Divide purchases into three practical groups:

• A specified source of supply: where there is a documented justification, which also requires legal assessment.
• Approved alternative suppliers: where several suppliers can deliver the required result.
• Free choice subject to specifications: where objective standards for quality, safety or compatibility are sufficient.

Keep a brief written justification for each restriction. The founder’s habits or a good personal relationship with a supplier are not, on their own, an adequate operational explanation.

2. Assess the restriction under the right legal framework

Greece has no dedicated law comprehensively governing franchise agreements, nor a statutory system of mandatory pre-contractual disclosure specifically for franchising. This does not mean that any contractual term can be imposed. The general rules of the Greek Civil Code apply, including those on good faith in negotiations and the performance of obligations.

Purchasing obligations also need to be reviewed under Greek Law 3959/2011 on the protection of free competition and, where its conditions for application are met, Article 101 of the Treaty on the Functioning of the European Union. Regulation (EU) 2022/720, together with the European Commission’s accompanying guidelines, provides an important framework for assessing vertical agreements.

Exclusive purchasing is neither automatically unlawful nor automatically permitted simply because it forms part of a franchise agreement. Factors to consider include the scope and duration of the obligation, the parties’ market positions and whether the obligation is genuinely necessary. A broad purchasing obligation may also be assessed as a non-compete obligation under the relevant framework.

Give your legal adviser the actual purchasing list, the available alternatives and details of your relationships with suppliers. An isolated clause, without this information, is not enough for a meaningful review.

3. Make the financial impact clear before agreement

Prospective franchisees must be able to understand how mandatory purchases will affect their operations. Do not limit disclosure to a statement that ‘supplies are purchased through the network’. Provide a clear table showing the categories subject to purchasing obligations, the source of supply and the main commercial terms.

The table should include, for example:

• the basis for pricing and how changes will be communicated,
• any minimum quantities or compulsory initial order,
• delivery charges, payment periods and returns terms,
• the procedure for approving an alternative supplier.

If the franchisor resells products or receives financial benefits from the network’s purchases, be transparent about that relationship. Agree with your legal adviser which details are material to the prospective franchisee’s decision and how to present them accurately.

Article 197 of the Greek Civil Code establishes the duty to act in good faith during negotiations. The European Code of Ethics for Franchising also provides for full and accurate written disclosure within a reasonable time before signing; it is a self-regulatory framework, not a Greek law of general application.

4. Establish an approval process, not just a prohibition

For categories where alternative sourcing is feasible, create a clear procedure for submitting and assessing requests. Franchisees should know which technical information, certificates or samples are required, who will assess the request and when to expect a response.

Set objective acceptance criteria and record the reasons for rejection. If testing costs are involved, clarify in advance who will bear them. This helps avoid a process that looks open on paper but operates as a complete barrier in practice.

Test the process in your existing outlet before applying it to franchisees. Can a second supplier meet the same specifications? How long does the assessment take? The results will help you design workable rules, but they do not replace legal review.

Practical takeaway: before requiring exclusive purchasing, document the need, check its legality and explain the financial impact. Choose the least restrictive rule that effectively protects the network’s shared identity.