1. When Can You Challenge a Required Supplier Price Increase?
Your franchisor may require you to buy ingredients, equipment, or packaging from approved suppliers. An increase is not unlawful merely because it reduces your margins. The first question is whether the new charges fall within the pricing authority and purchasing terms you accepted. Check those terms before rejecting an order.
Identify the Exact Price Change
A higher invoice does not always mean the supplier raised its unit price. Freight, minimum-order requirements, and bundled purchases may explain the difference.
- Compare dated invoices for the same items and quantities.
- Keep price notices, purchase orders, and delivery charges.
- Record how the change affects your operating costs.
Check Who Sets the Price
The franchisor might set the price or require purchases from a separate supplier. A franchise agreement review can identify who controls price changes and what notice, if any, the contract requires.
- Locate purchasing, price adjustment, and supplier clauses.
- Check whether the operations manual adds purchasing rules.
- Identify any promised pricing method or approval process.
2. What Do the Agreement and Fdd Reveal?
Your signed agreement governs ongoing purchasing duties; the Franchise Disclosure Document (FDD) explains sourcing restrictions disclosed before the sale. Federal FTC Rule 16 C.F.R. § 436.5(h), Item 8, addresses required purchases, alternative-supplier approval, and certain supply-related revenue. The rule requires disclosure, not a cap on supply prices.
Compare Item 8 with Purchasing Terms
Read the FDD and signed agreement together. An FDD review can help identify what was disclosed about required purchases and potential supplier alternatives.
| Document | Question to Ask |
|---|---|
| FDD Item 8 | Who supplies required goods, and how are alternatives approved? |
| Franchise agreement | Who may change prices or purchasing requirements? |
| Supplier notices | What changed, when, and under whose authority? |
Examine Supplier Payments and Approvals
A franchisor or an affiliate may earn revenue from required purchases. Item 8 requires specified disclosures, but receiving supplier payments does not by itself establish unlawful pricing.
- Compare disclosed payment arrangements with available records.
- Read criteria and fees for approving alternative suppliers.
- Note whether supplier specifications can be changed.
3. How Should You Raise a Pricing Objection?
A written objection gives the franchisor specific figures to explain. Identify the disputed charges, when they changed, and which contract terms may apply. Unless the agreement or applicable law provides otherwise, making an objection does not suspend purchasing or payment duties.
Prepare a Documented Request
An attorney can compare the price notice with your actual orders and agreement. Ask about identifiable charges rather than accusing the supplier of overcharging without supporting records.
- Identify disputed items, dates, and invoice amounts.
- Attach relevant pricing notices and contract language.
- Request an explanation of the pricing or approval decision.
Ask before Switching Suppliers
A less expensive supplier may not satisfy brand specifications or approval rules. If the agreement requires permission, ask for it in writing before placing an outside order.
- Compare specifications, quality controls, and delivery terms.
- Follow the stated alternative-supplier application process.
- Keep requests, responses, and rejection reasons in writing.
4. Could a Supplier Dispute Lead to Termination?
Purchasing from an unapproved supplier or withholding payments could create a separate default. Under Business and Professions Code § 20020, termination before the contract expires generally requires good cause, notice, and a chance to cure substantial noncompliance. Section 20021 recognizes exceptions. A franchise dispute review can distinguish the original price complaint from the alleged default.
Read Any Default or Termination Notice
Section 20020 generally requires at least 60 days' notice and at least 60 days to cure. The cure period cannot exceed 75 days unless both parties separately agree to an extension. Section 20021 creates exceptions.
- Identify the precise contractual obligation cited.
- Check the notice date and stated cure requirements.
- Review whether a Section 20021 exception is alleged.
Respond without Creating Another Breach
A disagreement over supply prices does not erase separate payment duties. Under § 20021(j), nonpayment of amounts due to the franchisor or its affiliate may support termination if the franchisee fails to pay within five days after receiving written notice that payment is overdue.
- Identify which amounts are due to the franchisor or an affiliate.
- Retain correspondence about proposed corrective steps.
- Review dispute-resolution provisions before taking action.
5. Frequently Asked Questions
How much does a franchise lawyer cost?
Fees depend on whether the attorney reviews pricing documents, negotiates with the franchisor, or handles a contested claim. Ask what work the proposed fee covers.
Can I sell my franchise while a supplier dispute is unresolved?
A pending dispute may affect a buyer's review and the franchisor's transfer approval. Check the transfer clause, required disclosures, and any existing default notice before agreeing to a sale.
What if the approved supplier cannot deliver essential inventory?
Document the shortage, notify the franchisor, and check any emergency purchasing or alternative-source provision. Obtain required authorization before ordering elsewhere.
6. Review the Price Dispute before Changing Suppliers
When required supplies rise in price, your invoices show the cost but not necessarily who can change it. SJKP's attorneys can review the agreement, FDD, notices, and purchasing records to assess the objection and any default or termination risk.
Contact SJKP with the agreement, recent invoices, and supplier notices to discuss the next steps in your pricing objection.
03 Nov, 2026
