Does Carls provide any material benefits, such as renewal or additional franchises, based on a franchisee's use of designated or approved suppliers?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
lready designated as approved under our delivery program. In addition, we must pre-approve all sales recording processes that originate from the delivery service providers. We have the right to modify the participation criteria or discontinue these initiates at any time upon written notice to you. See also Item 11.
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.
Occasionally, during major promotions, suppliers will sell items to us at a discount. At our discretion, we will either pass the savings directly to you or contribute any amounts collected in excess of
the discount to an advertising fund (see Item 11). Currently, certain of our soft drink suppliers offer rebates to both you and us based on volume purchases.
During our fiscal year ended January 29, 2024, we received rebates from several suppliers Door Dash ($94,300); KDM ($26,409); Dr. Pepper ($147,508); and Coca-Cola ($2,177,365).
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, Carls does not provide material benefits, such as renewal or additional franchises, to franchisees based on their use of designated or approved suppliers. However, Carls negotiates system-wide contracts with suppliers, allowing franchisees to purchase products at negotiated prices and terms. Carls reserves the right to limit the number of suppliers who deliver products at those prices and terms. To obtain negotiated prices and be eligible for certain revenue-sharing incentives for equipment, smallwares, and supplies, franchisees must purchase from Carls's third-party vendor, Wasserstrom Holdings, Inc., and its subsidiaries.
Carls requires franchisees to purchase approximately 90% of their fixtures, furnishings, equipment, décor, signs, food items, ingredients, supplies, and other products from approved suppliers or in accordance with Carls's specifications. These items are estimated to represent about 65% of a franchisee's controllable purchases, excluding labor and general administrative costs. While Carls does not offer material benefits for using approved suppliers, franchisees may benefit from system-wide contracts and potential revenue-sharing incentives.
During major promotions, suppliers may offer discounts to Carls, which Carls may pass on to franchisees or contribute to an advertising fund. Certain soft drink suppliers offer rebates to both Carls and its franchisees based on volume purchases. For the fiscal year ended January 29, 2024, Carls received rebates from suppliers such as Door Dash ($94,300), KDM ($26,409), Dr. Pepper ($147,508), and Coca-Cola ($2,177,365). These funds were primarily used to offset the costs of point-of-purchase materials and other production advertising costs for promoting Carls's products.