Does the Burros Fries Franchise Agreement grant franchisees a share in the proceeds from Burros Fries' activities through alternative channels of distribution?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
We are not responsible for paying any compensation to you concerning the sale of products (including menu and retail items), services or kitchen equipment (if we choose to sell kitchen equipment in the future) by using the Internet or other similar venue, by alternative means of distribution, advertising cooperative programs, outlets, businesses that are or are not substantially similar to the Franchised Business or any business that does not use the Marks. For clarity, the Franchise Agreement grants you no rights to sell and/or distribute products (including menu and retail items) or kitchen equipment or offer services through any alternative channels of distribution without our permission or share in any of the proceeds from our activities through alternative channels of distribution.
Source: Item 12 — TERRITORY (FDD pages 38–40)
What This Means (2024 FDD)
According to Burros Fries' 2024 Franchise Disclosure Document, franchisees are not entitled to a share of the proceeds from the franchisor's activities through alternative distribution channels. The FDD explicitly states that the Franchise Agreement does not grant franchisees the right to sell or distribute products through alternative channels without permission, nor does it provide for any share in the proceeds from Burros Fries' activities via these channels. This means that Burros Fries retains full control over and benefits from any sales made through channels other than the franchisee's brick-and-mortar location. Alternative channels of distribution could include online sales, partnerships with supermarkets or specialty stores, or other avenues that Burros Fries might pursue.
This policy has significant implications for prospective Burros Fries franchisees. While franchisees are granted a territory, they will not benefit financially from Burros Fries' efforts to expand its brand presence through alternative channels, even if those channels operate within the franchisee's territory. This could limit the potential revenue streams for franchisees and make them more reliant on their local customer base. It also means that franchisees may see Burros Fries products sold in other venues, such as supermarkets, without receiving any compensation for those sales, even if it potentially impacts sales at their franchised location.
Burros Fries reserves significant rights regarding alternative distribution channels, including the right to advertise and sell products through the internet, distribute products through other channels, and develop branded products for sale in various outlets. The franchisor is not obligated to compensate franchisees for sales made through these channels, even within the franchisee's territory. This arrangement is not uncommon in franchising, as franchisors often seek to maximize brand exposure and revenue through diverse channels, but it's crucial for franchisees to understand that they will not directly benefit from these efforts financially.
Furthermore, Burros Fries retains the right to implement advertising cooperative programs that may involve franchisees but ultimately benefit the system as a whole. The franchisor can also develop and distribute proprietary products through various outlets without compensating franchisees for sales within their territory, unless otherwise agreed in writing. This highlights the importance of franchisees carefully reviewing the Franchise Agreement to understand the full scope of their rights and limitations, particularly regarding alternative distribution channels and potential competition from the franchisor's other activities.