For what purposes can Chesters use the payments they receive from suppliers?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
er. We and our affiliates have the right to receive payments from suppliers on account of their actual or prospective dealings with you and other franchisees and to use all amounts received without restriction for any purposes we deem appropriate (unless we and our affiliates agree otherwise with the suppliers). Certain suppliers to our franchisees (who sell directly to franchisees or indirectly through distributors in the supply
chain) have agreed to pay us license fees on franchisee purchases of shortening products, blended proprietary items, paper goods, and signs and promotional items. These fees range from 0.5% to 30% of their gross sales depending on the particular item.
During 2024, we received a total of $37,118,501 from direct franchisee purchases of certain equipment and proprietary food products and from purchases by unaffiliated suppliers and grocery wholesalers to whom we sold certain equipment and proprietary food products for resale to our franchisees. That is 91.97% of our total revenue of $40,358,110. These figures are from our audited financial statements. Our affiliates did not receive any revenue from direct franchisee purchases and leases during 2
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 19–22)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, Chesters and its affiliates have the right to receive payments from suppliers based on their dealings with franchisees. These payments can be used without restriction for any purposes Chesters deems appropriate, unless otherwise agreed with the suppliers.
Chesters also receives license fees from certain suppliers, ranging from 0.5% to 30% of their gross sales, on franchisee purchases of items like shortening products, blended proprietary items, paper goods, and signs and promotional items. In 2024, Chesters received $37,118,501 from direct franchisee purchases of equipment and proprietary food products, as well as from sales to unaffiliated suppliers and grocery wholesalers for resale to franchisees. This revenue represented 91.97% of Chesters' total revenue of $40,358,110.
This arrangement means that Chesters benefits financially from the purchases franchisees make from approved suppliers. While Chesters states that it negotiates purchase agreements with suppliers to promote the overall interests of the franchise system, the unrestricted use of supplier payments could create a conflict of interest. A prospective franchisee should consider how these financial incentives might influence Chesters' decisions regarding supplier approvals and product standards. It's important to note that the FDD does not specify how these funds are actually used, leaving franchisees to trust that Chesters will act in the best interest of the system as a whole.