Mandatory Purchasing in Franchising: Suppliers and Terms

When you join a franchise network, you often commit to buying goods, packaging or equipment from designated suppliers. Joint purchasing can ensure consistent quality and efficient logistics, but it also limits your purchasing freedom. Before choosing a brand, look beyond the current price list: check who can change it, who bears the stock risk and what you are allowed to do if a delivery fails to arrive.

1. Establish the scope of mandatory purchasing

Ask for the product range to be divided into three categories: products purchased exclusively through the central purchasing system, products sourced from approved suppliers, and purchases left to your discretion. The distinction matters: being able to choose between several wholesalers does not necessarily give you the right to order an identical product from outside the approved list.

Also check purchases that are less visible than the goods on your shelves: staff uniforms, cleaning products, packaging, promotional materials and spare parts. Sometimes the obligation also covers transport or equipment servicing. Each of these items can create an ongoing dependence on a single business partner.

For each category, establish:

• who sells the goods and issues the invoice;
• who sets the specification and price;
• whether there is a minimum order value or frequency;
• who can expand the list of mandatory products;
• how a substitute product or new supplier is approved.

Distinguish between the responsibilities of the franchisor and the supplier. If they are separate companies, a promise of support from head office does not, in itself, establish who is liable for a failed delivery. Check whether the arrangements also need to be reflected in a separate supply agreement.

2. Check the total cost of supply, not just the price list

Compare the total cost of an order: the price of the goods, transport, packaging, logistics surcharges and costs arising from minimum purchase requirements. Account separately for deposits and payment terms, as these affect the cash needed for day-to-day operations. An attractive unit price may offer little benefit if it forces you to hold large stocks.

Ask whether the applicable price is the one in force when the order is placed, confirmed or dispatched. Establish how price changes are notified and the rules for cancelling an order after an increase. If the agreement provides for index-linked price adjustments, the mechanism should specify the index, frequency and extent of any change, rather than giving one party unlimited discretion.

It is also worth asking about supplier discounts and rebates. These may go to head office, to franchisees or be shared. Do not assume that a discount secured through joint purchasing automatically reduces your invoice. Ask for a clear explanation of the model used.

When comparing brands, use the same sample basket of products and a similar delivery frequency. Also check whether promotional terms apply only when the outlet opens or throughout the business relationship.

3. Allocate the risks of excess stock and shortages

Mandatory opening stock should match the needs of the individual outlet. Ask who determines the quantities and whether you can challenge them. For products with a limited shelf life, agree on the minimum remaining shelf life on receipt and a procedure for refusing deliveries that do not meet this requirement.

Promotional campaigns deserve particular attention. Establish whether participation is compulsory, who orders the stock and who bears the cost of markdowns or unsold products. Do not confuse the right to make a claim over faulty or non-compliant goods with the right to return goods in saleable condition: these are different rights, and returns of surplus stock must be expressly agreed.

Also ask about the opposite situation: a product being unavailable from the mandatory supplier. A practical contingency procedure should specify:

• how to report a shortage and the deadline for a response;
• the conditions for buying from an alternative source;
• quality requirements for substitute products;
• how additional costs will be covered;
• how supply shortages affect the obligation to maintain the full product range.

It is worth speaking to franchisees who run similar outlets within the network. Ask about specific situations — delays, claims and seasonal surpluses — rather than just their general view of the relationship.

4. Understand the legal limits on purchasing restrictions

In Poland, a franchise agreement is an ‘unnamed contract’, meaning it is not a separately defined contract type under the Civil Code. There is no dedicated statute comprehensively regulating franchising, nor a specific statutory obligation to give prospective franchisees a franchise disclosure document. The relationship is governed primarily by the Civil Code, including the principle of freedom of contract under Article 353¹ and the provisions on performing contractual obligations and liability for breaches. Voluntary codes of good practice do not replace legislation or the contract.

Purchasing restrictions are also assessed under Poland’s Act on Competition and Consumer Protection and, where the relevant conditions are met, EU competition law. Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Commission Regulation (EU) 2022/720, which exempts certain vertical agreements from the prohibition on anti-competitive agreements, may be relevant.

An exclusive supplier arrangement is not automatically unlawful. The assessment depends, among other things, on the scope and duration of the restriction, the parties’ market positions and the justification for it. Equally, a requirement to maintain quality standards does not give unlimited freedom to impose any terms. Broad exclusive purchasing obligations are worth referring to a lawyer specialising in competition law.

5. Turn agreed terms into operating rules

Before signing the agreement, prepare a short table covering each purchasing obligation, its cost, possible changes and the contingency arrangement. Establish which document takes precedence if the agreement, supply terms and operations manual contain conflicting rules. Negotiate sufficient time to implement changes, rather than relying on assurances that price increases have been rare in the past.

The practical takeaway: choose a brand only once you can explain whom you must buy from, how prices can change and what you can do with surplus stock or if a delivery fails to arrive. Those answers should come from binding terms, not just the franchise recruitment conversation.