What is the All States M.E.D. franchisor's right to retain volume rebates, markups, and other benefits from suppliers?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
nd regional or local differences. Franchisor has the right to give its consent to one (1) or more franchisees to provide certain products or services not authorized for general use as part of the System. Such consent will be based upon the factors in Section 10.4 and shall not create any rights in Franchisee to provide the same products or services.
- 13.1.4 Franchisor has the right to retain volume rebates, markups, and other benefits from suppliers or in connection with the furnishing of supplies. Franchisee shall have no entitlement to or interest in any such benefits.
- 13.1.5 Franchisor shall provide Franchisee, in the Operations Manual or other written or electronic form, with a list of specifications and, if required, a list of Approved Suppliers for some or all of the supplies, furniture, fixtures, inventory, equipment and other approved or specified items and services, and Franchisor may from time to time issue revisions to such list. If Franchisor or an Affiliate is an Approved Supplier, Franchisee shall execute a standard form purchase or supply agreement for the items to be supplied by Franchisor or its Affiliate. If Franchisee desires to utilize any products, services or new technology that Franchisor has not approved (for products and services that require supplier approval), Franchisee shall first send Franchisor sufficient information, specifications and samples for Franchisor to determine whether the service or product complies with its standards and specifications or whether the supplier meets its Approved Supplier criteria. Franchisee shall bear all expenses incurred by Franchisor in connection with determining whether it shall approve an item, service or supplier, not to exceed $1,000.00. Franchisor will decide within a reasonable time (usually thirty [30] days) after receiving the required information whether Franchisee may purchase or lease such items or services or from such supplier. Approval of a supplier may be conditioned on the supplier's ability to provide sufficient quantity of product; quality of prod
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, the franchisor has the right to retain any volume rebates, markups, and other benefits received from suppliers. The franchisee has no entitlement to or interest in these benefits. This means that All States M.E.D. franchisees will not directly benefit from any negotiated discounts or incentives that the franchisor secures with its approved suppliers.
This arrangement is fairly common in franchising, as it allows the franchisor to manage supplier relationships and potentially generate additional revenue. However, it's important for prospective franchisees to understand that they will likely not see any direct financial benefit from the franchisor's purchasing power. Instead, the franchisor benefits from these arrangements.
The FDD also states that All States M.E.D. will provide franchisees with a list of specifications and, if required, a list of approved suppliers for various items, including supplies, furniture, fixtures, inventory, equipment, and services. The franchisor may revise this list from time to time. If the franchisor or an affiliate is an approved supplier, the franchisee must execute a standard purchase or supply agreement for those items. If a franchisee wants to use a product, service, or new technology that All States M.E.D. hasn't approved, the franchisee must first provide sufficient information for the franchisor to determine if it meets their standards. The franchisee bears all expenses for this approval process, up to $1,000.00.
All States M.E.D. will decide within a reasonable time, typically 30 days, whether the franchisee can purchase or lease the items or services from the proposed supplier. Approval may depend on the supplier's ability to provide sufficient quantity, quality, competitive pricing, production and delivery capability, dependability, and general reputation. However, All States M.E.D. is not required to approve any particular supplier or to disclose confidential standards and specifications to prospective suppliers.