How does the Company receive consideration for price negotiation services for Crepe De Licious franchisees?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
- Rebates As agent for the franchisees, the Company's performance obligation is to negotiate pricing with large vendors and approved suppliers of food supplies on a system-wide basis for the franchisees. As consideration for the price negotiation services provided, the Company receives volume-based rebate revenue from these third-party vendors. These volume rebates are associated with the quantity of franchisee purchases of materials and supplies under the negotiated pricing levels. Revenue from these rebates is recognized at a point in time as the rebates are earned from the vendors based on purchases made by franchisees. The rebates are received from the vendors quarterly. The Company does not have any significant financing components in its contracts with customers as payment is received shortly after the rebate is earned.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to the 2025 Crepe De Licious FDD, the company negotiates pricing with large vendors and approved suppliers of food supplies on a system-wide basis for its franchisees. As compensation for these price negotiation services, Crepe De Licious receives volume-based rebate revenue from these third-party vendors. These rebates are directly linked to the quantity of materials and supplies franchisees purchase under the negotiated pricing agreements.
Crepe De Licious recognizes the revenue from these rebates at the point in time when they are earned from the vendors, which is based on the purchases made by franchisees. The rebates are received from the vendors on a quarterly basis. This arrangement means that a portion of the cost savings Crepe De Licious negotiates with suppliers is shared with the company in the form of rebates, incentivizing them to secure favorable pricing for franchisees.
For a prospective Crepe De Licious franchisee, this arrangement suggests that the cost of goods may be lower due to the franchisor's negotiation efforts. However, the franchisee should be aware that the franchisor benefits directly from the volume of purchases made by franchisees, which could potentially influence recommendations or requirements regarding suppliers and products. It would be prudent for a potential franchisee to inquire about the specific vendors and the typical rebate amounts to fully understand the potential cost savings and any associated obligations.