Does Chesters receive payments from suppliers based on their dealings with franchisees?
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 2024. We estimate that the cost of your purchases from designated or approved suppliers will be approximately 70% to 95% of the total cost to establish, and approximately 20% to 40% of the total annual cost to operate, your Restaur
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 are not restricted in their use and can be used for any purpose Chesters deems appropriate, unless otherwise agreed with the suppliers. Certain suppliers pay Chesters license fees 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 certain equipment and proprietary food products, as well as from purchases by unaffiliated suppliers and grocery wholesalers who resold these items to franchisees. This revenue represented 91.97% of Chesters's total revenue of $40,358,110. Chesters's affiliates did not receive any revenue from direct franchisee purchases and leases during 2024.
For a prospective franchisee, this means that a portion of their purchases from approved suppliers contributes to Chesters's revenue stream. The FDD indicates that the cost of purchases from designated or approved suppliers is estimated to be approximately 70% to 95% of the total cost to establish a Chesters restaurant, and approximately 20% to 40% of the total annual cost to operate the restaurant. This reliance on approved suppliers is a standard practice in franchising, allowing franchisors to maintain quality control and brand consistency, but it also creates a financial relationship where the franchisor benefits directly from franchisee purchases.