Exclusive-Supply Clauses in French Franchising: The 10-Year Limit and the 80% Rule

The exclusive supply clause in French franchising: two limits that constrain the tie

An exclusive supply clause in French franchising is the provision by which a franchisee agrees to source its goods only from the franchisor, from one of the franchisor's subsidiaries, or from suppliers the network has referenced. It is one of the most commercially important terms in the contract and one of the most legally exposed. A franchisor entering France instinctively wants supply tied as tightly and for as long as possible, because uniform sourcing is what keeps the brand consistent across every outlet. French law and EU competition law both cut against that instinct. They impose two distinct limits: a hard domestic cap on how long the tie can last, and a competition-law condition on whether the tie may exist at all. A clause can satisfy one limit and fail the other.

The first thing to establish is the difference between a total tie and a partial one. The supply obligation may be total, requiring the franchisee to source everything from the designated channel, or it may bear only on a percentage of purchases, in which case it is described as a quasi-exclusive supply clause. That distinction matters because EU competition law fixes a numerical threshold — 80% of the franchisee's annual purchases — at which a purchasing obligation is reclassified as a non-compete obligation and becomes subject to a duration rule. Below that threshold the analysis is different from the analysis above it.

The validity of any such clause is therefore suspended on conditions drawn from two bodies of law at once: French internal law, which governs duration and legitimacy, and EU competition law, which governs the clause wherever the network affects trade between member states. This article treats each limit in turn — the ten-year cap first, then the indispensability test, then the EU framework and the 80% rule — and closes with the drafting and negotiation consequences for both sides.

The 10-year supply cap on franchise exclusive purchasing in France

The domestic limit is categorical. Article L 330-1 of the Commercial Code caps the duration of an exclusive-purchase commitment at ten years. A franchisor cannot lawfully bind a franchisee to source exclusively from it, or from its designated channel, for longer than a decade. This is a statutory ceiling, not a default that the parties can contract around: an agreement to a fifteen-year or twenty-year exclusive tie does not become valid because both sides signed it.

The consequence of exceeding the ceiling is more measured than franchisors sometimes fear, and this is the single most useful point to grasp about the rule. A clause that provides for a period longer than ten years is not void in its entirety. It is void only for the part that exceeds ten years. The commitment survives for its first ten years and falls away thereafter. A drafting error on duration does not, therefore, destroy the supply arrangement; it truncates it. That has practical significance when a network audits its French contracts and finds legacy clauses drafted to a longer term — the exposure is the loss of the excess years, not the collapse of the tie.

The ceiling attaches to the exclusivity commitment itself, not to the franchise contract as a whole. A franchise agreement can run for longer than ten years; what cannot run for longer than ten years is the obligation to purchase exclusively. This is why the duration of the franchise and the duration of the supply tie should be considered separately when a contract is drafted or reviewed, and why a long-term franchise with a supply clause silently pegged to the full term carries a latent defect.

Renewal and successive contracts: how the 10-year franchise supply cap is counted

Two refinements govern how the ten-year period is measured, and both change the practical answer to the question franchisors most often ask: can the tie continue past a decade? The starting point is Article L 330-2 of the Commercial Code, which addresses what happens when parties layer successive exclusivity commitments on top of one another. The second refinement comes from the case law, which reads the two articles together to permit uninterrupted renewal.

The interaction of these rules is where drafting goes wrong. Article L 330-2 is an anti-circumvention device: it stops a franchisor from stacking a second ten-year tie onto the tail of the first and claiming twenty years of exclusivity from one relationship. Yet the case-law gloss means the ceiling is not an absolute bar on long relationships. The distinction is between the duration of any one clause, which the statute controls, and the duration of the commercial relationship, which renewal can extend. A franchisor that wants supply continuity beyond ten years achieves it through genuine renewal of a compliant clause, not through a single over-long commitment or a back-to-back stack that Article L 330-2 will collapse to the original expiry date.

When an exclusive supply clause in French franchising is valid: the indispensability test

Duration is only the first limit. A supply clause that respects the ten-year cap can still be struck down, because its validity also depends on competition law. Here the governing standard is exacting. The Cour de cassation (Commercial Chamber) has held that an exclusive or quasi-exclusive supply clause is lawful only where it is indispensable to preserve the identity and reputation of the franchise network. Convenience to the franchisor is not the test; commercial preference is not the test; the test is indispensability to the network's identity and reputation.

That standard has teeth. French courts have held such a clause unlawful where it bore on nothing more than cash registers — equipment that has no bearing on the brand experience the customer receives, and whose sourcing cannot plausibly be said to protect the network's identity. The lesson generalises: the more the tied product is a generic input rather than a brand-defining good, the harder it is to justify tying its supply, and the more the clause looks like a device to capture the franchisee's purchasing rather than to protect the concept.

French courts have developed the point with reference to food distribution. An exclusive supply clause must be indispensable to the implementation of the franchise agreement to be lawful under competition law, and it can be validated only where it is necessary to the cohesion of the network — notably because of the specificity of the goods sold. In food retailing, exclusivity of supply may cover only goods that are proper to the network. The objective of maintaining the common identity and reputation of the network allows the franchisor to control the franchisee's supply in terms of a minimum assortment in the franchisor's own brands, so that customers are guaranteed a product of the brand, homogeneous across every outlet. That is the legitimate core of a supply tie: enough control to keep the brand's own goods present and consistent everywhere.

The outer boundary was drawn in a case where the clause prohibited any supply whatsoever — even in national brands — from competing purchasing centres, covering products that were absolutely indistinguishable from one another according to the wholesaler, save for their price. That was held totally disproportionate to the defence of the franchisor's legitimate interests and an anticompetitive clause. Its object was to guarantee full supply of the store at prices set by the franchisor and to prevent the franchisee from obtaining better prices elsewhere — objectives foreign to the protection of the franchisor's legitimate interests and an illegitimate infringement of the franchisee's freedom to trade in normal conditions. The clause was void for violation of Article L 420-1 of the Commercial Code.

Minimum assortment versus the franchisee's freedom to source elsewhere

The competition analysis of an exclusive supply clause in French franchising resolves into a single tension: the franchisor's legitimate need for a minimum assortment against the franchisee's freedom to source the rest of its goods elsewhere. French courts police the line between the two, and the drafting that survives is the drafting that respects it.

On the franchisor's side, the legitimate interest is homogeneity. A network is entitled to require that its own-brand goods appear in every outlet in a defined minimum assortment, so that a customer walking into any unit finds the products that define the brand, consistent across the network. Tying the supply of those goods is defensible because sourcing them elsewhere would defeat the very point of the concept. This is the control the maintenance of common identity and reputation permits, and it is the control a well-advised franchisor confines itself to.

On the franchisee's side, the freedom that must survive is the freedom to source goods that are not brand-defining from whatever supplier offers the best terms. Where products are indistinguishable except by price — generic national brands available from several purchasing centres — a clause that forecloses competing sources is not protecting the brand; it is capturing the franchisee's purchasing margin and denying it access to better prices. That is where a supply clause tips from lawful control into an anticompetitive foreclosure and, potentially, a significant imbalance imposing a competitive handicap. The franchisee that finds itself unable to buy commodity goods on the open market at market prices has a serious argument that the clause exceeds what the network's identity requires.

The franchisee's freedom to source elsewhere is not a marginal concession; it is the criterion that keeps the whole clause lawful. A franchisor drafting a supply tie should ask, product line by product line, whether tying it is genuinely necessary to the concept or merely convenient to the balance sheet. Everything that is merely convenient is exposed.

The EU framework for franchise exclusive purchasing in France: Pronuptia and Regulation 2022/720

Where the franchise contract affects trade between EU member states, EU competition law applies alongside the domestic rules, and it supplies both the foundational validity conditions and the numerical threshold that defines the modern analysis. The starting point is the foundational franchise case. In Pronuptia (Court of Justice of the EU, Case 161/84, 28 January 1986), the Court laid down for the first time the conditions of validity of an exclusive supply clause stipulated in a franchise contract. Such a clause must be justified by the necessity of preserving the identity and reputation of the network, and it cannot prohibit the franchisee from sourcing from other franchisees within the same network. That second condition is a real limit: a tie that forces the franchisee to buy from the franchisor even where a fellow franchisee could supply the same contract goods goes further than the network's identity requires.

The modern framework is set by Regulation (EU) 2022/720 of 10 May 2022, which applies Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices — the vertical-agreements block exemption. Its decisive contribution to supply tying is a definition. The Regulation defines a non-compete obligation as any direct or indirect obligation prohibiting the buyer from manufacturing, buying, selling, or reselling goods or services that compete with the contract goods or services, or any direct or indirect obligation requiring the buyer to purchase from the supplier, or from another undertaking the supplier designates, more than 80% of the buyer's total purchases of the contract goods or services and their substitutes on the relevant market, calculated on the basis of value or, where standard industry practice, volume, over the preceding calendar year.

The 80% figure is the pivot of the whole EU analysis. A supply tie below that level is a purchasing arrangement; a tie that captures more than 80% of the franchisee's annual purchases is, in the eyes of the Regulation, a non-compete obligation — and non-compete obligations carry a duration rule. This is the mechanism by which a "quasi-exclusive" supply clause, which a franchisor might regard as a moderate half-measure, is pulled into the strictest part of the framework as soon as it crosses four-fifths of purchases.

The 80% non-compete rule and the franchise-term exception

Once a supply obligation is classified as a non-compete obligation under the 80% rule, a duration limit attaches. Where the network affects trade between EU member states and the exclusivity obligation covers more than 80% of purchases, Article 5(1) of Regulation (EU) 2022/720 requires, in principle, that the duration of the clause be determined and shorter than five years. A non-compete obligation that is indefinite, or that runs beyond five years, falls outside the safe harbour of the block exemption.

Franchising, however, receives a specific accommodation, and it is decisive for how long a franchise supply tie may run under EU law. In its guidelines of 28 June 2022, the European Commission indicates that the only temporal limit to take into account for a franchise is the term of the franchise contract itself. The reasoning is set out in a passage worth stating in full, because it expresses the competition policy that governs franchise supply ties.

Two conditions unlock the exception, and both must hold. First, the non-compete — that is, the supply tie above 80% — must relate to goods or services necessary to maintain the common identity and reputation of the franchise network. This is the same necessity idea that runs through Pronuptia and the domestic indispensability test; a tie on generic goods does not qualify. Second, the duration of the non-compete must not exceed the duration of the franchise contract. Where both conditions are met, the ordinary five-year ceiling does not bite: the duration of the obligation is immaterial up to the term of the franchise.

This EU accommodation must be read together with the domestic ten-year cap, because they are not the same rule and neither displaces the other. EU law, through the Commission guidance, allows a qualifying franchise supply tie to run for the full term of the franchise contract without a fixed five-year ceiling. French law, through Article L 330-1, independently caps the exclusive-purchase commitment at ten years regardless of the length of the franchise. A franchise contract of twelve years with a qualifying supply tie may satisfy the EU framework and still be pruned to ten years by the domestic cap. The prudent position observes both: source-tie for no more than ten years under the domestic rule, confine the tie to goods genuinely necessary to the concept under both regimes, and keep the obligation within the franchise term.

Drafting and negotiating an exclusive supply clause in French franchising

The two limits translate into a short set of drafting and negotiation rules that both sides should apply before signing. A franchisor wants the widest defensible tie; a franchisee wants to preserve its purchasing freedom and its margin. The law gives each side leverage, and the clause that survives litigation is the one drafted to the law's boundaries rather than against them.

For the franchisor, the discipline is to tie only what the concept requires and only for as long as the law allows. Confine the exclusive or quasi-exclusive obligation to the network's own-brand goods that form the minimum assortment defining the customer experience. Leave generic and national-brand lines to the open market, because tying them invites nullity under Article L 420-1 and a significant-imbalance challenge under Article L 442-1. Set the duration at ten years or less to respect Article L 330-1, and where continuity beyond a decade is wanted, achieve it through genuine renewal of a compliant clause rather than a single over-long term or a back-to-back stack that Article L 330-2 will collapse. Where trade between member states is affected and the tie exceeds 80% of purchases, keep the obligation within the franchise term and be ready to show it is necessary to the network's identity, so that the Commission's franchise exception applies.

For the franchisee, the leverage is the indispensability standard. A supply tie is not a natural feature of franchising to be accepted without scrutiny; it is a clause whose validity is conditional. A candidate should ask which goods are tied and why, insist that commodity and national-brand lines remain open to competitive sourcing, and treat a total tie on indistinguishable products as a red flag rather than a formality. Where a tie imposes a competitive handicap — a structurally worse price than open-market sourcing would give — the franchisee has a significant-imbalance argument under Article L 442-1 and, where the clause is disproportionate, a nullity argument under Article L 420-1.

The franchisee's own exclusivity and non-compete undertakings sit alongside the supply tie and follow their own logic. Some contracts require the franchisee to devote itself body and soul to the brand, permitting no other activity — an excessive intrusion. The more defensible form simply prohibits the franchisee from operating a competing brand within a defined operating zone. Restrictive-competition clauses of this kind, taking effect during the contract, generate less litigation than the post-term versions, but they obey the same conditions of validity: limitation in time, limitation in space, justification, and proportionality. Meeting all four, they produce full effect and are interpreted according to the parties' intention; failing any of them, they are exposed.

Frequently asked questions about the exclusive supply clause in French franchising

What is the maximum duration of an exclusive supply clause in French franchising?

Ten years. Article L 330-1 of the Commercial Code caps an exclusive-purchase commitment at ten years. A clause drafted for a longer period is not void in whole; it is void only for the part that exceeds ten years, so it holds for the first decade and lapses beyond that.

Can a franchise supply tie last longer than ten years through renewal?

Yes, in substance. The courts have held that Articles L 330-1 and L 330-2 do not prohibit the renewal of exclusivity relations, without interruption, over a total period exceeding ten years — they prohibit only any single exclusivity clause longer than ten years. Continuity beyond a decade is achieved through genuine renewal of a compliant clause, not a single over-long term.

What does the 80% non-compete rule mean for franchise exclusive purchasing in France?

Under Regulation (EU) 2022/720, an obligation requiring the franchisee to buy more than 80% of its annual purchases of the contract goods and their substitutes from the supplier or its designee is treated as a non-compete obligation. Crossing 80% pulls a "quasi-exclusive" supply clause into the stricter part of the EU framework, where a duration rule applies.

Is a franchise supply clause limited to five years under EU law?

In principle a non-compete obligation must be for a determined period shorter than five years under Article 5(1) of Regulation (EU) 2022/720. But the Commission's guidance of 28 June 2022 provides that, for franchising, the duration of a non-compete necessary to maintain the network's common identity and reputation is immaterial, provided it does not exceed the term of the franchise contract.

When is an exclusive supply clause in a French franchise invalid?

When it is not indispensable to preserve the identity and reputation of the network. A clause tying generic goods, or equipment such as cash registers, or blocking supply of indistinguishable national brands from competing purchasing centres, is disproportionate to the franchisor's legitimate interests and can be void under Article L 420-1 of the Commercial Code, or struck as a significant imbalance under Article L 442-1.

Can a franchisee source some goods outside the network?

For goods that are not brand-defining, yes. The franchisor's legitimate control extends to a minimum assortment in its own brands, to keep the brand consistent across outlets. Goods that are indistinguishable except by price must remain open to competitive sourcing; a clause foreclosing them captures the franchisee's margin rather than protecting the concept, and is exposed to nullity.

What is the difference between a total and a quasi-exclusive supply clause?

A total tie requires the franchisee to source everything from the designated channel. A quasi-exclusive tie bears only on a percentage of purchases. The distinction matters under EU law: once the tie exceeds 80% of annual purchases it is reclassified as a non-compete obligation and becomes subject to the duration rule in Regulation (EU) 2022/720.

Does the ten-year cap apply to the whole franchise contract?

No. The ten-year ceiling in Article L 330-1 attaches to the exclusive-purchase commitment, not to the franchise contract as a whole. A franchise can run longer than ten years; the supply tie within it cannot. Duration of the franchise and duration of the supply tie should always be assessed separately.

Key takeaways on the exclusive supply clause in French franchising

How our French lawyers can help with your exclusive supply clause in French franchising

Supply tying is the point at which a French franchise most often exceeds what the law allows without either side realising it until a dispute forces the question. Our lawyers act for franchisors building or auditing a French network and for franchisees and candidates weighing their exposure before signing. On the franchisor side, we structure exclusive and quasi-exclusive supply clauses that hold: confined to the goods genuinely necessary to the network's identity, drafted within the ten-year cap of Article L 330-1, kept within the franchise term where the 80% threshold of Regulation (EU) 2022/720 is crossed, and renewed rather than over-extended where continuity beyond a decade is needed.

On the franchisee side, we test a proposed tie against the indispensability standard, identify where a clause captures purchasing margin rather than protecting the brand, and build the arguments — nullity under Article L 420-1, significant imbalance under Article L 442-1 — where the tie imposes a competitive handicap. We read the supply clause together with the franchisee's own non-compete undertakings and the surrounding exclusivity, so that the whole architecture of the contract is assessed, not one clause in isolation.

This article is for general information only. It does not constitute legal advice. The validity of an exclusive or quasi-exclusive supply clause turns on its precise wording, the goods it covers, its duration, and whether the network affects trade between EU member states. Contact our French lawyers for qualified advice before drafting, signing, or challenging a supply clause in a French franchise.