How to Assess Minimum Sales Targets Before Buying a Franchise

A franchise brand may expect its franchisees to achieve a certain level of sales. However, a contractual minimum sales target is different from an optimistic business plan forecast: missing it may lead to additional payments, loss of rights or a dispute over termination. Before joining a franchise network, examine not only whether the target is achievable, but also how it is measured and the consequences of falling short. A well-drafted target takes account of the conditions within the franchisee’s control and allows an opportunity to put things right.

1. Establish exactly what the target measures

The phrase “minimum annual turnover” is not sufficiently clear on its own. The same sales figures can produce different results depending on how taxes, returns, discounts and online orders are treated. First, establish whether the target measures sales value, transaction numbers or units sold. Then define the scope of the calculation in the agreement or a signed schedule.

Each of the following questions needs a written answer:

• Will the calculation include or exclude VAT?
• From which period’s sales will returns and cancellations be deducted?
• How will discounts funded by the brand be recorded?
• Will the calculation use the amount before delivery platform commissions are deducted?
• Who will be credited with orders received centrally but prepared by the outlet?
• Will gift cards count when sold or when redeemed?

Do not assume that the target and ongoing fees use the same calculation. An agreement may use different definitions of turnover for these two purposes. Test the difference with your accountant using a sample monthly sales breakdown. Ask the brand to provide a worked example as an attachment too; do not rely solely on a verbal explanation.

It also matters which records take precedence. Have the agreement specify how discrepancies will be investigated if the point-of-sale system, accounting records and head office reports do not match. The franchisee’s access to detailed calculations and the procedure for challenging incorrect entries should be clear.

2. Test the target against the business’s actual capacity

The turnover of a successful outlet in another city does not automatically make a reasonable target for your business. Footfall, opening hours, seating capacity, delivery area and customer habits may differ. Request anonymised results from comparable outlets, together with information on how long they had been trading. The aim is not to obtain an earnings promise, but to understand the basis of the contractual obligation.

Convert the target into a daily transaction count: divide the sales target for the period by the number of trading days, then by the assumed average transaction value. Compare the resulting customer numbers with your staffing, equipment and premises capacity. Separately assess whether the product mix needed to achieve that average transaction value is realistic.

Do not treat the initial trading period as equivalent to that of an established business. Propose phased targets to allow time to build a customer base after opening. Clarify how the first year will be calculated if the business opens midway through a calendar year, and how seasonality will be taken into account. Dividing an annual target equally across the months can unnecessarily make a seasonal business appear to be underperforming.

It should also be clear how a monetary target will be updated over the years. Rather than accepting a vague “increase to be determined by head office”, negotiate a predefined calculation method and notification timetable. Remember that higher nominal turnover driven by price increases does not necessarily mean more customers or greater profit.

3. Understand the legal framework in Türkiye

Türkiye has no dedicated franchise law governing franchise agreements. Nor is there a general requirement specific to franchising to provide a mandatory pre-contract disclosure document or register on a public register. This does not mean that sales targets fall outside legal scrutiny.

Franchise relationships are treated as contracts of a distinct legal nature, assessed primarily under the Turkish Code of Obligations No. 6098 and the Turkish Commercial Code No. 6102. Freedom of contract is not unlimited: mandatory legal provisions and the principle of good faith matter. Depending on the circumstances, the Turkish Code of Obligations provisions on standard contract terms may also apply to pre-drafted sales target clauses.

If a sales target is combined with other restrictions, it may need to be reviewed under the Law on the Protection of Competition No. 4054. In particular, an obligation to meet a target should be assessed separately where it is combined with interference in selling prices or customer restrictions. The existence of a target alone does not make it unlawful.

Do not assume that the law gives a franchisee an automatic right to a reduced target or extra time. A target’s validity and enforceability are assessed in the context of the agreement as a whole. It is therefore safer to negotiate explicit safeguards before signing than to wait for a dispute to arise.

4. Set out the process for missed targets in writing

The main risk often lies not in the target itself, but in attaching severe consequences to a small shortfall. Distinguish between a shortfall in a single period and repeated underperformance. Establish which periods will be used for assessment and whether a shortfall can be made up in the following period.

During negotiations, propose the following sequence: written notice, a joint check of the figures, an analysis of the causes, an improvement plan and a reassessment. If additional time is to be allowed, its start date and duration should be clear. Specify the operational support the brand will provide during this period too; the response should not simply be to expect the franchisee to spend more on advertising.

How will the target calculation account for head office’s failure to supply products, outages of mandatory systems or sales interruptions attributable to the brand? Establish how these events must be documented and reported. Rather than assuming that every event outside the franchisee’s control creates an automatic exemption, set out an adjustment mechanism agreed by both parties.

Finally, check whether a shortfall can trigger several consequences at once, such as additional fees, loss of territorial rights or termination. Practical takeaway: Before signing, summarise the target in a one-page table covering measurement, assessment period, updates, exceptions, time allowed to remedy a shortfall and consequences. If you cannot explain a row, the clause is not yet clear enough.