Can Casiola require a franchisee to exclusively use a designated supplier?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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
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 mandate that franchisees exclusively use a designated supplier or distributor for services, products, equipment, supplies, or materials, including System Supplies and Service Vehicles. This designated supplier or distributor may be Casiola itself or its affiliates.
This requirement means that a Casiola franchisee might not have the freedom to choose suppliers based on price or personal preference. Casiola and its affiliates may also receive payments from these designated suppliers based on their dealings with franchisees, and Casiola can use these amounts without restriction, including for profit.
If a franchisee wishes to use a non-approved supplier, they must submit a written request to Casiola, including the reason for the request and any relevant information, reports, specifications, and samples. The franchisee is also responsible for paying a supplier evaluation fee to Casiola for each requested product, service, equipment, supply, supplier, or distributor to cover the costs of evaluation and testing. Casiola will then notify the franchisee of its approval or disapproval within 60 days of completing the evaluations; however, Casiola is not required to approve alternative suppliers and will exclusively determine the level of evaluation to be conducted.
This arrangement is fairly common in franchising, allowing franchisors to maintain quality control and consistency across all franchise locations. However, it also means franchisees have less control over their costs and supply chain, and are subject to Casiola's decisions and potential financial benefits from supplier relationships.