How to Assess Mandatory Supply Terms When Buying a Franchise

When joining a franchise network, assess not only the initial fee but also which products your business must buy and from whom. Mandatory sourcing can maintain consistent quality, but an arrangement that leaves pricing, delivery and alternative sourcing unclear can put profitability and continuity of sales under pressure. Before signing, your aim should be to establish clearly which party bears the supply risk while protecting brand standards.

1. Map out the scope of mandatory purchasing

Start by turning contractual terms such as “approved product”, “centralised purchasing” and “authorised supplier” into a specific list. Core products, packaging, cleaning materials, staff uniforms and consumables may not all be subject to the same rules. Requiring an item to meet brand standards is different from requiring it to be bought exclusively from a particular company.

Answer the following questions for each product category:

• Is the seller the franchisor, an associated company or an independent supplier?
• Must you buy from a single source, or are there several approved suppliers?
• Does the requirement cover all your needs, specified products or a proportion of your purchases?
• Are there minimum orders, mandatory pack sizes or purchasing commitments for a set period?
• Must you continue buying products that you do not use or that are no longer on the menu?

Do not compile the list solely from the sales presentation. Compare the scope set out in the contract, purchasing terms and supplier quotation. If there are broad statements such as “all requirements must be sourced centrally”, ask for the requirements covered to be defined more precisely in writing.

2. Understand the legal framework in Türkiye

Türkiye has no separate franchise law specifically governing franchise agreements. Nor is there a mandatory pre-contractual disclosure document or public registration system specifically for franchise relationships. Do not therefore assume that every detail of mandatory sourcing will automatically be provided in a standard statutory disclosure document.

The general contractual provisions of the Turkish Code of Obligations No. 6098 are important, as is the Turkish Commercial Code No. 6102, depending on the nature of the commercial relationship. Freedom of contract gives the parties scope to determine their supply arrangements, but it does not make provisions that conflict with mandatory legal rules valid.

Mandatory purchasing terms must also be considered under the Law on the Protection of Competition No. 4054. In particular, provisions that restrict competition are assessed under Article 4 of that Law. The Block Exemption Communiqué on Vertical Agreements No. 2002/2 may be relevant where its conditions are met. The former Communiqué No. 1998/7 on franchise agreements is no longer in force.

A sole-supplier requirement is neither inherently unlawful nor automatically lawful simply because it is intended to uphold brand standards. Its scope, duration, market conditions and the need to maintain quality must be considered together. Falling outside the block exemption does not, by itself, establish that an arrangement is unlawful; seek advice from a competition law specialist on the specific circumstances.

3. Calculate the delivered cost, not just the list price

Assess the supplier’s price list alongside the actual ordering terms. A product’s unit price may look reasonable, while transport, storage, mandatory pack quantities and short payment terms increase the total cost. Check the conditions for earning any discount and whether it can subsequently be reclaimed.

Prepare a sample order basket and show these items separately: product price, taxes, transport, delivery surcharges, any packaging deposit and financing costs arising from the payment terms. Ask your accountant to distinguish the effect of taxes on costs from their effect on cash flow. Based on your projected sales, also allow for the risk of unsold stock, spoilage and wastage.

Ask how price changes are determined. The timing of updates, the notification method and the price applicable to orders already placed should be clear. A statement that “the current list price applies” may not, on its own, explain which price applies between ordering and delivery.

Ask in writing whether the franchisor receives rebates or discounts from the supplier and how these affect the price charged to franchisees. Do not assume that any such benefit will automatically be passed on to you. If sharing is promised, the contract should specify how your share is calculated and when it is credited.

4. Agree what happens if deliveries fail

The real test of dependence on a single source comes when the product does not arrive. Record in writing when orders are accepted, normal delivery lead times, the procedure for short deliveries and how urgent requests will be handled. Be particularly clear about who is making the delivery commitment: if the franchisor and supplier are separate companies, a statement by one may not automatically bind the other.

Structure the right to buy elsewhere as a controlled process rather than unrestricted freedom. You can specify the delay that allows you to request an alternative source, the product specifications, who grants approval and the response deadline. Do not assume that silence amounts to approval; if this approach is intended, it must be expressly agreed.

For defective products or those that do not meet specifications, retain records such as photographs, batch numbers, delivery documents and storage conditions. Inspection and notification obligations may vary according to the nature of the transaction, so ensure that your internal reporting process meets the applicable legal deadlines. Also clarify who bears the cost of replacements, returns, additional transport and emergency purchases from alternative sources.

5. Test three scenarios before signing

For your final check, use three scenarios: a normal order, an unexpected price increase and a supply disruption. In each case, can you identify from the contract whom to contact, what you will pay and which products you can use to keep trading? If the answer rests solely on a sales representative’s verbal assurance, the arrangement is not yet clear enough.

Have the franchise agreement reviewed alongside the supplier’s terms of sale. Before signing, resolve any provisions that shift delivery responsibility between the parties, specify conflicting payment terms or make alternative sourcing impractical.

Practical takeaway: Before accepting mandatory supply terms, put the product scope, delivered cost and alternative purchasing procedure for supply disruptions in writing. Reliable supply that allows you to maintain the required quality standard matters just as much as the standard itself.