Can a Closet Storage Concepts franchisee be a supplier to other franchisees?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
and specifications as set forth in this Agreement and the Operations Manual, including, but not limited to, standards, specifications of product and service quality and uniformity, and equipment and software compatibility among individual Closet & Storage Concepts System franchises, and any revisions or amendments. Franchisee shall purchase and use only products and services, including equipment, vehicles, fixtures, signs, branded products or services, inventory, supplies, logo-imprinted products, software and hardware which Franchisor approves, including purchasing from approved suppliers or a designated sole supplier for any items. Franchisor and its affiliates may be an approved supplier or designated sole supplier for any purchases of products or services. Franchisor may charge a software setup fee. Franchisee may purchase or obtain these products and services through Franchisor or a supplier approved by Franchisor. Franchisee cannot be a supplier to other franchisees and cannot purchase items from another franchisee without Franchisor's express written approval. If Franchisor has not designated an approved supplier for a particular product or service, Franchisee shall purchase these products or services only from suppliers that meet Franchisor's standards and specifications. Franchisee may request approval of a supplier, which may, at Franchisor's option, include inspection of the proposed supplier's facilities and testing of product samples. The independent testing facility Franchisor designates may charge a fee for the testing. Franchisee or the proposed supplier shall pay the test fees. Franchisee must also pay for Franchisor's costs in making a determination on the proposed supplier, including the costs of inspection of the supplier's facilities, evaluation of the test results, and a background check of the supplier. Franchisor reserves the right, at its option, to re-inspect the facilities and products of any approved supplier, and to revoke approval if the supplier fails to continue to meet any of Franchisor's criteria.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, a franchisee is generally prohibited from acting as a supplier to other franchisees or purchasing items from them without express written approval from Closet Storage Concepts. This restriction ensures quality control and uniformity within the Closet Storage Concepts system, as all franchisees are expected to adhere to the franchisor's standards and specifications.
To maintain these standards, Closet Storage Concepts requires franchisees to purchase products and services, including equipment, vehicles, fixtures, signs, branded products, inventory, supplies, logo-imprinted products, software, and hardware, only from approved suppliers or a designated sole supplier. Closet Storage Concepts or its affiliates may themselves be approved suppliers or the sole designated supplier for any of these items. If there isn't an approved supplier for a specific product or service, franchisees must source from suppliers that meet Closet Storage Concepts' standards and specifications.
If a franchisee wishes to use a new supplier, they can request approval from Closet Storage Concepts. This process may involve inspection of the supplier's facilities and testing of product samples, with fees for testing and inspection borne by the franchisee or the proposed supplier. Closet Storage Concepts retains the right to re-inspect approved suppliers and revoke approval if they fail to meet the franchisor's criteria. This system allows Closet Storage Concepts to monitor and control the quality of goods and services used throughout the franchise network.
Closet Storage Concepts may also receive fees and other payments from approved suppliers in connection with franchisee purchases. These fees can be used by Closet Storage Concepts for their own purposes, which may include supporting the Closet Storage Concepts system and brand. This arrangement is common in franchising, where franchisors often negotiate volume discounts or rebates with suppliers, and these benefits may be shared between the franchisor and franchisees.