Can Casiola designate a single supplier for services and require franchisees to use them exclusively?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
ds, suppliers and distributors of System Supplies, Service Vehicles, and approved equipment, supplies and services to be used by the Franchised Business and that Franchisee shall, after receipt in writing of such modification, abide by same and, among other things, not reorder any brand and/or purchase from any supplier or distributor that is no longer designated or approved by Franchisor;
- (5) 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 Service Vehicles 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 of the System and that Franchisor may use all amounts so received without restriction and for any purpose, including Franchisor's profit;
- (6) If Franchisee proposes or requests that Franchisor consider the approval of products, services, equipment, supplies, suppliers and/or distributors for use in the Franchised Business where such products, services, equipment, supplies, suppliers and/or distributors are not, presently, at the time of Franchisee's request, approved for use in the System, Franchisee: (a) must provide Franchisor with a written request where Franchisee specifies the product, service, equipment, supply, supplier and/or distributor, the reason for Franchisee's request; (b) shall timely submit to Franchisor such information, reports, specifications, and samples as Franchisor, in Franchisor's Reasonable Business Judgment requests; and (c) shall pay to Franchisor a supplier evaluation fee per requested product, service, equipment, supply, supplier and/or distributor to be considered including, but not limited to, the supplier evaluation fees that Franchisor, in Franchisor's Reasonable Business Judgment, establishes and assesses based on, among other things, the administrative costs and time associated with evaluating, assessing and testing the proposed product, service, equipment, supply, supplier and/or distributor including, but not limited to Franchisor's internal employees and independent third parties engaged and/or retained by Franchisor for evaluation and testing. The foregoing fees and payments shall be paid by Franchisee to Franchisor within 14 days of the date of Franchisor's invoice. Upon Franchisee's compliance with the foregoing, within 60 days of the completion of all evaluations, Franchisor shall notify Franchisee of Franchisor's approval or disapproval, which shall be determined by Franchisor in Franchisor's Reasonable Business Judgment. Under no circumstance shall the foregoing be construed as implying that Franchisor is required to approve alternative suppliers and Franchisor shall exclusively determine, in Franchisor's Reasonable Business Judgment, the level of evaluation to be conducted by Franchisor; and
- (7) At all times Franchisee must maintain a physical presence within Franchisee's Operating Market for the purpose of overseeing and managing the Approved Services and Products in accordance with System standards;
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, Casiola retains the right to designate a single supplier or distributor for any services, products, equipment, supplies, or materials, including System Supplies and Service Vehicles. Casiola can require franchisees to exclusively use these designated suppliers or distributors, which may include Casiola itself or its affiliates.
This arrangement means that as a franchisee, you might be obligated to purchase certain items or services only from suppliers approved by Casiola. This could impact your costs and operational flexibility. Casiola and its affiliates may receive payments from these designated suppliers based on the franchisee's dealings with them, and Casiola can use these amounts without restriction, including for profit.
If a franchisee wishes to propose an alternative supplier or product not currently approved, they must submit a written request to Casiola, provide all necessary information and samples, and pay a supplier evaluation fee. Casiola will then evaluate the proposal and decide whether to approve it, but is under no obligation to do so. Casiola determines the level of evaluation required in its reasonable business judgment. This process ensures that Casiola maintains control over the quality and consistency of its brand and offerings, but it also means franchisees have limited autonomy in choosing suppliers.
Casiola may also designate itself or its affiliates as the sole and exclusive supplier of technology systems, booking systems, payment processing systems, and other products or services offered in connection with the Approved Services and Products. In this case, Casiola benefits from fees and charges without providing any compensation or benefit to the franchisee. This further emphasizes Casiola's control over key aspects of the business and its ability to generate revenue through these exclusive supplier arrangements.