Can Better Blend collect payments from franchisees on behalf of vendors?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
- 7.16 Obligations to Third Parties. Franchisee shall pay all vendors and suppliers in a timely manner.
Franchisee shall pay all taxes when due.
If Franchisee borrows money, it shall comply with the terms of its loan and make all loan payments when due.
If Franchisee leases the Location, Franchisee shall comply with its lease for the Location and make all rent payments when due.
- 11.13 Temporary Management. If (i) the Principal Executive dies or becomes incapacitated, (ii) this Agreement is terminated or expires and BBF elects to purchase assets of the Business as provided in Section 14.6, or (iii) Franchisee is operating the Business in a manner which, in BBF's reasonable opinion, constitutes a danger to the health or safety of any person, then BBF may (but is not obligated to) enter the Location and operate and manage the Business for Franchisee's (or Franchisee's estate's) account until this Agreement is terminated, the Business is transferred, the Business is purchased by BBF, or BBF returns the Business to Franchisee.
BBF's operation and management will not continue for more than 90 days without Franchisee's consent (or the consent of the representatives of Franchisee's estate).
If this Agreement has not terminated or expired, then BBF will account to Franchisee for all net income from the Business during the period in which BBF operates the Business.
BBF may collect a temporary management fee equal to 10% of Adjusted Gross Sales for the period in which BBF operates the Business, plus all expenses
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2024 FDD)
According to the 2024 Better Blend Franchise Disclosure Document, franchisees are generally responsible for paying their own vendors and suppliers. However, Better Blend does retain the right to temporarily manage a franchise under certain conditions, and during such management, Better Blend can collect payments and deduct fees.
Specifically, Better Blend may enter the location and operate the business for the franchisee's account if the Principal Executive dies or becomes incapacitated, if the agreement is terminated or expires and Better Blend elects to purchase assets, or if the franchisee is operating the business in a manner that endangers health or safety. This temporary management can last up to 90 days without the franchisee's consent.
During this period of temporary management, Better Blend will account to the franchisee for all net income from the business. Better Blend is allowed to collect a temporary management fee equal to 10% of Adjusted Gross Sales, in addition to all expenses incurred during the period they operate the business. This arrangement allows Better Blend to ensure the continued operation and brand integrity of the franchise during transitional periods, while also compensating them for their management services.
While the FDD outlines the franchisee's responsibility to pay vendors directly, it also carves out an exception where Better Blend can step in and manage the business temporarily, collecting revenue and paying expenses (including vendor payments) during that time. This is a crucial distinction for prospective franchisees to understand, as it highlights both their autonomy and the franchisor's ability to intervene under specific circumstances.