Can Cordova require a franchisee to exclusively use a designated supplier?
Cordova Franchise · 2025 FDDAnswer from 2025 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 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; and
- (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.
Source: Item 23 — RECEIPTS (FDD pages 44–195)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, Cordova retains the right to designate a single supplier or distributor for services, products, equipment, supplies, or materials, including System Supplies. Cordova can require franchisees to exclusively use this designated supplier or distributor, which may be Cordova itself or its affiliates. This means that as a franchisee, you may be obligated to purchase certain items only from suppliers approved or chosen by Cordova.
Cordova and its affiliates may receive payments from these designated suppliers or distributors based on their dealings with franchisees. These payments can be used by Cordova without restriction and for any purpose, including profit. This arrangement is common in franchising, where franchisors often negotiate deals with suppliers to benefit from volume discounts or rebates, which can then be shared between the franchisor and the supplier.
If a franchisee wishes to use a product, service, equipment, supply, or distributor not already approved by Cordova, the franchisee must submit a written request to Cordova. The franchisee must also provide all necessary information, reports, specifications, and samples requested by Cordova. Additionally, the franchisee is responsible for paying a supplier evaluation fee to Cordova for each requested item or supplier to cover the costs associated with the evaluation and testing process. This fee covers administrative costs, employee time, and any third-party evaluations Cordova deems necessary. The franchisee must pay these fees within 14 days of the invoice date.