To obtain negotiated prices and revenue sharing incentives, is a Carls franchisee required to purchase equipment, smallwares, and supplies from Wasserstrom Holdings, Inc. and its subsidiaries?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
We negotiate system-wide contracts with a number of suppliers under which Carl's Jr. Restaurants may purchase products at a negotiated price and terms. Franchisees are entitled to purchase products at the price and terms negotiated by us; however, we reserve the right to limit the number of suppliers who deliver the products at those prices and terms. With respect to equipment, smallwares and supplies, to obtain the negotiated price and to be eligible for certain revenue sharing incentives, you must purchase the equipment, smallwares and supplies from our third-party vendor Wasserstrom Holdings, Inc. and its subsidiaries. There currently are no purchasing or distribution cooperatives. We do not provide material benefits to a franchisee based on the franchisee's purchase of particular products or services or the use of particular suppliers.
Approximately 90% of your purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies and other products in connection with the establishment of the Franchised Restaurant must be purchased in accordance with our specifications or from approved suppliers. We estimate that these items represent approximately 65% of your controllable purchases, excluding labor and general administrative costs in connection with the ongoing operation of the Franchised Restaurant. We do not provide material benefits (e.g., renewal or additional franchises) to you based on use of designated or approved suppliers.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 36–40)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, franchisees must purchase equipment, smallwares, and supplies from Wasserstrom Holdings, Inc. and its subsidiaries to obtain negotiated prices and be eligible for certain revenue sharing incentives. Carls negotiates system-wide contracts with various suppliers, allowing franchisees to purchase products at negotiated prices and terms. However, Carls reserves the right to limit the number of suppliers who deliver products at those prices.
Approximately 90% of a Carls franchisee's purchases or leases of fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products related to establishing the franchised restaurant must adhere to Carls' specifications or be sourced from approved suppliers. These items are estimated to represent about 65% of the franchisee's controllable purchases, excluding labor and general administrative costs for the restaurant's ongoing operation.
If a franchisee wishes to use a supplier not already approved by Carls for goods or materials they aren't required to purchase from Carls, its affiliates, or designated suppliers, they must seek approval. This process may involve inspections of the supplier's facilities and testing of products at the franchisee's expense. Carls will notify the franchisee of the decision within 60 days. A deposit of $1,500 is required for the inspection, with the franchisee responsible for any additional costs. Approval may depend on factors like delivery frequency, reporting capabilities, service standards, and the number of existing approved suppliers. Carls may also periodically require repeat testing and facility audits to ensure ongoing compliance.