Can C3 Wellness Spa require a franchisee to exclusively use a designated supplier?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
- (3) The Franchised Business will exclusively: (a) offer and provide the Approved Spa Products and Services or, as applicable the Spa Facility and Management Services; (b) offer and provide from the Spa Location the Approved Spa Products and Services in accordance with the System's standards and specifications; (c) exclusively purchase and use System Supplies purchased from Franchisor or Franchisor's designated suppliers; (d) exclusively purchase and utilize equipment, supplies, promotional materials, point of sale systems and Business Management System(s)
designated by Franchisor and subject to Franchisor's specifications; (e) purchase interior displays, point of sale displays, uniforms, supplies, marketing materials and promotional materials including, but not limited to, System Supplies, as designated by Franchisor and only from Franchisor or Franchisor's approved supplier(s); and (f) purchase from distributors and other suppliers approved by Franchisor all other materials, goods, and supplies (including but not limited to System Supplies) used in preparing, offering, selling, promoting, and serving the Approved Spa Products and Services.
(4) Franchisor has and will periodically approve suppliers and distributors of the equipment, materials, supplies and products including, but not limited to, System Supplies, that meet Franchisor's standards, specifications, and requirements including, without limitation, standards, specifications, and requirements relating to the equipment and supplies to be utilized by the Franchised Business.
(5) Franchisor, in Franchisor's Reasonable Business Judgment, may, from time to time, modify the list of approved brands, suppliers and distributors of System Supplies and approved equipment, supplies and services to be utilized by the Franchised Business and Franchisee shall, after receipt in writing of such modification, not reorder any brand and/or purchase from any supplier or distributor that is no longer designated or approved by Franchisor.
(6) Franchisor reserves the right to designate, from time to time, a single supplier and/or distributor for any services, products, equipment, supplies, or materials including, but not limited to, the System Supplies and to require Franchisee to use such a designated supplier exclusively, which exclusive designated supplier and/or distributor may be Franchisor and/or Franchisor's affiliates.
Franchisor and its affiliates may receive payments from suppliers and/or distributors on account of such supplier's or distributor's dealings with Franchisee and other franchisees and may use all amounts so received without restriction and for any purpose Franchisor and its affiliates deem appropriate.
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
According to the 2024 C3 Wellness Spa Franchise Disclosure Document, C3 Wellness Spa has the right to designate a single supplier or distributor for services, products, equipment, supplies, or materials, including System Supplies, and can require franchisees to exclusively use that designated supplier. This designated supplier may be C3 Wellness Spa itself or one of its affiliates.
C3 Wellness Spa also periodically approves suppliers and distributors of equipment, materials, supplies, and products, including System Supplies, that meet the company's standards and specifications. These standards relate to the equipment and supplies utilized by the franchised business. C3 Wellness Spa may modify the list of approved brands, suppliers, and distributors of System Supplies and approved equipment, supplies, and services. Franchisees must then stop reordering any brand or purchasing from any supplier or distributor no longer designated or approved by C3 Wellness Spa after receiving written notice of the change.
Franchisees are required to exclusively purchase and use System Supplies from C3 Wellness Spa or its designated suppliers. They must also exclusively purchase and utilize equipment, supplies, promotional materials, point of sale systems, and Business Management System(s) designated by C3 Wellness Spa and subject to its specifications. Additionally, franchisees must purchase interior displays, point of sale displays, uniforms, supplies, marketing materials, and promotional materials, including System Supplies, as designated by C3 Wellness Spa, only from C3 Wellness Spa or its approved suppliers. Franchisees must also purchase all other materials, goods, and supplies used in preparing, offering, selling, promoting, and serving the Approved Spa Products and Services from distributors and other suppliers approved by C3 Wellness Spa.
This arrangement allows C3 Wellness Spa to maintain quality control and consistency across all franchise locations. However, it also means that franchisees may not be able to source supplies from the lowest-cost provider, potentially impacting their profitability. Furthermore, C3 Wellness Spa and its affiliates may receive payments from suppliers and distributors based on their dealings with franchisees, which C3 Wellness Spa can use without restriction.