How to Assess Mandatory Supply Terms Before Buying a Franchise

When joining a franchise network, looking at the initial fee alone is not enough. Your business’s day-to-day cash requirements may depend on which products you must buy, from whom and on what terms. Mandatory supply requirements covering everything from packaging and software to raw materials and equipment can put pressure on an investment that initially looks affordable. Before signing, therefore, review the supply arrangements as a separate due diligence exercise: ask for documents, calculations and clear contractual provisions rather than verbal assurances.

1. Compile a complete list of compulsory purchases

Your first question should not be, “Will I have to buy products from head office?” but, “Which items can I source elsewhere?” Some brands require only their signature products to be purchased centrally, while others may tie cleaning supplies, uniforms and payment systems to designated providers too.

Ask the franchisor to consolidate the purchasing obligations in the contract and operations manual into a single list. Record the following for each item:

• The authorised supplier and the company that will issue the invoice.
• The reason for the requirement and how long it will apply.
• The minimum order quantity, ordering frequency and delivery lead time.
• The price list, payment terms and additional service charges.
• The conditions for approving an alternative supplier and the time allowed for a decision.

The list should cover not only the opening package but also recurring purchases throughout the operation of the business. If the operations manual can be amended later, ask specifically whether those changes could introduce new purchasing obligations. Request a dated initial list as an appendix to the contract.

Requiring certain inputs to protect brand standards can be understandable. However, obligations with no clear justification or defined scope make it harder to assess the investment.

2. Understand the legal framework in Türkiye

Türkiye has no standalone franchise law specifically governing franchise agreements. Nor is there a general requirement for a franchise-specific pre-contract disclosure document or registration in a franchise register. General obligations relating to the trade registry, tax and operating permits are separate matters.

This does not mean that supply provisions fall outside legal scrutiny. The Turkish Code of Obligations No. 6098 is relevant to contract formation and performance, and to the review of standard terms where the applicable conditions are met. The Turkish Commercial Code No. 6102 applies to commercial relationships and the obligations of traders. Matters involving the use of trade marks may fall under the Industrial Property Law No. 6769.

Mandatory supply and exclusive purchasing arrangements are also assessed under Law No. 4054 on the Protection of Competition. The Block Exemption Communiqué on Vertical Agreements No. 2002/2 is relevant to vertical agreements that meet its conditions. A compulsory purchasing clause is not automatically unlawful; its scope, duration, market context and other restrictions must be considered together.

Remember that a franchisee is an independent business operator. Do not assume that consumer protections will automatically apply to purchases made for your commercial investment. The absence of a specific franchise disclosure obligation does not remove general legal liability for misleading information or conduct contrary to the principle of good faith.

3. Calculate the total supply cost, not just the list price

A product’s catalogue price is not its true cost to the business. Include transport, cold-chain logistics, storage, packaging, deductions on returns and wastage in the same calculation. Establish what order threshold qualifies for a discount and whether that discount is lost if payment is late.

Prepare a simple cost table for each key product: purchase price, delivery costs, expected wastage and usable quantity. This will help you see whether a product that looks cheaper per box is actually more expensive per usable portion or unit. Assess the cash-flow impact of taxes and their deductibility separately with your accountant.

Include the payment schedule in the same exercise. Paying suppliers in advance while waiting to receive customer payments can create a working capital requirement regardless of profitability. Keep opening stock separate from regular replenishment orders.

Where appropriate, ask existing franchisees for sample invoices for delivered goods, with personal and commercially sensitive information redacted. The aim is not to question their sales performance but to identify logistics or service charges that are not apparent from the contract. Also ask whether the supplier is connected to the franchisor and whether the franchisor receives any benefits linked to purchasing volumes; do not assume these will be passed on to you.

4. Address price changes and delivery risks in the contract

A statement that “prices are set by head office” does not, on its own, provide predictability. Clarify how changes will be calculated, how much notice will be given and whether they will apply to orders already placed. If pricing is linked to a foreign currency, specify the exchange-rate source and the date to be used; have a specialist check that the arrangement complies with the applicable foreign exchange rules.

There should also be a workable procedure for delivery problems. Seek written answers to the following questions:

• How should you report deliveries that are incomplete, damaged or have only a short remaining shelf life?
• Within what timeframe will replacements, returns or price adjustments be handled?
• Can you use a temporary alternative if the main supplier cannot provide a product?
• Who will pay recall, disposal and transport costs?

Ask for decision-making powers and financial responsibility to be balanced. If head office determines order quantities, any provision leaving you to bear all the risks of excess stock and expiry dates deserves particular scrutiny. Additional purchases arising from compulsory participation in promotions should also be clearly addressed.

5. Put together a supply due diligence file before signing

Go into your final assessment with the draft contract, supply appendices, dated price lists, sample order terms and delivery conditions. Check whether the terms in the offer conflict with the document you will sign. Record unexplained items as unresolved investment risks, not as “costs to be discovered later”.

Ask your accountant to calculate how price rises, higher minimum orders and delayed deliveries would affect your cash requirements. Ask your lawyer to review the purchasing obligations, unilateral powers to change terms and compliance with competition law. If documents are not provided, insist on completing your review before making any payment whose refundability is unclear.

Practical takeaway: Do not commit until you have written confirmation of whom you will pay, what you must buy, how prices will be set and which risks you will bear. In a well-run franchise network, clear supply terms matter just as much as brand standards.