Is Belocal's franchisor allowed to receive payments from suppliers on account of their dealings with the franchisee?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor or its affiliates may receive payments, discounts, or other compensation from suppliers on account of the suppliers' dealings with Franchisor, Franchisee, or other franchisees.
Franchisor and its affiliates may use any amounts that it or they receive from suppliers for any purpose that Franchisor deems or they deem appropriate.
Further, Franchisor and its affiliates may make a profit on the sale of any goods or services to Franchisee.
Franchisee hereby agrees that Franchisor and its affiliates are entitled to such profits, payments, discounts, or other compensation.
Franchisee must receive prior, written approval from Franchisor before purchasing any products, supplies, or services from any supplier not already approved by Franchisor.
If Franchisee desires to purchase, lease, or use any products, services, or other items from an unapproved supplier, Franchisee must submit to Franchisor a written request for such approval, or must request the supplier itself to make such request.
When reviewing an item or supplier, Franchisor may consider various factors, including, but not limited to, pricing, quality, consistency, efficiency, effectiveness, control of and protection of proprietary information, ability to service the entire franchise system, data security, credit worthiness, and solvency.
At Franchisor's request, Franchisee must pay or reimburse Franchisor for Franchisor's reasonable expenses incurred in the supplier/item approval process (whether or not approval of the supplier is granted).
Franchisor has the right to require that its representatives be permitted to inspect the proposed supplier's business premises, software, security systems, or procedures, and require that samples from the proposed supplier be delivered, if applicable, either to Franchisor or to an independent laboratory designated by Franchisor, for testing.
A charge, not to exceed the cost of the inspection and of the test (including Franchisor's administrative costs attributable to both), must be paid by Franchisee or the supplier.
Franchisor reserves the right, at its option, to re-inspect from time to time the business premises and products of any approved supplier.
Franchisor has the right to revoke, in its sole discretion, the approval of any item or supplier that fails to meet Franchisor's standards.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Belocal or its affiliates are permitted to receive payments, discounts, or other compensation from suppliers due to the suppliers' business dealings with Belocal, its franchisees, or itself. Moreover, Belocal and its affiliates have the discretion to utilize these received amounts for any purpose they deem appropriate.
This arrangement means that Belocal can benefit financially from the relationships its franchisees have with approved suppliers. While this is a common practice in franchising, it's important for a prospective franchisee to understand that the franchisor may have a financial incentive to approve certain suppliers over others, potentially impacting the franchisee's costs or product quality.
Furthermore, Belocal can also profit from the direct sale of goods or services to the franchisee, and the franchisee agrees that Belocal is entitled to these profits, payments, discounts, or other compensation. This highlights the importance of carefully evaluating the approved supplier list and comparing prices to ensure competitive rates. Franchisees are required to get prior written approval from Belocal before purchasing from unapproved suppliers. Belocal will consider factors like pricing, quality, consistency, and data security when reviewing potential suppliers.
Belocal can request the franchisee to cover the franchisor's reasonable expenses during the supplier/item approval process, regardless of whether the supplier is ultimately approved. Belocal also has the right to inspect a proposed supplier's business premises and can revoke approval of any supplier that fails to meet its standards. These stipulations emphasize the franchisor's control over the supply chain and the potential costs a franchisee might incur in adhering to these requirements.