How does Crepe De Licious receive consideration for price negotiation services provided to 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 Crepe De Licious's 2025 Franchise Disclosure Document, 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, based on the purchases made by franchisees. The rebates are received from the vendors on a quarterly basis. This arrangement means that Crepe De Licious's income from these rebates is directly tied to the purchasing volume of its franchisees, incentivizing the company to negotiate favorable pricing and terms with suppliers.
For a prospective franchisee, this arrangement suggests that Crepe De Licious has a vested interest in securing competitive pricing for supplies, which could lower the franchisee's operating costs. However, it also means that a portion of the franchisor's revenue is dependent on franchisee purchasing behavior and the negotiated rebate agreements with vendors. Franchisees may want to inquire about the specific vendors involved, the typical rebate percentages, and how these rebates have impacted costs for existing franchisees.