Can Desi District collect payments from franchisees on behalf of vendors?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 8.4 Purchasing. Desi District Franchise Group may negotiate prices and terms with vendors on behalf of the System. Desi District Franchise Group may receive rebates, payments or other consideration from vendors in connection with purchases by franchisees. Desi District Franchise Group has the right (but not the obligation) to collect payments from Franchisee on behalf of a vendor and remit the payments to the vendor and to impose a reasonable markup or charge for administering the payment program. Desi District Franchise Group may implement a centralized purchasing system. Desi District Franchise Group may establish a purchasing cooperative and require Franchisee to join and participate in the purchasing cooperative on such terms and conditions as Desi District Franchise Group may determine.
- 8.5 No Liability of Franchisor. Desi District Franchise Group shall not have any liability to Franchisee for any claim or loss related to any product provided or service performed by any Approved Vendor or Required Vendor, including without limitation defects, delays, or unavailability of products or services.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, Desi District Franchise Group has the right, but not the obligation, to collect payments from franchisees on behalf of a vendor and remit those payments to the vendor. Desi District can also impose a reasonable markup or charge for administering this payment program. This arrangement is part of a broader system where Desi District may negotiate prices and terms with vendors on behalf of the entire franchise system and may receive rebates, payments, or other consideration from vendors based on franchisee purchases.
For a prospective franchisee, this means that Desi District could potentially streamline the payment process to vendors, possibly offering negotiated rates or terms that might be more favorable than what an individual franchisee could secure. However, it also means that Desi District has the authority to add a markup to these payments, which would increase the franchisee's costs. Franchisees should inquire about the specifics of this program, including which vendors are included, the typical markup charged, and whether participation is mandatory.
It is also important to note that Desi District may implement a centralized purchasing system or establish a purchasing cooperative that franchisees may be required to join. This could further consolidate purchasing power and potentially affect the franchisee's relationships with vendors. However, Desi District assumes no liability for any claims or losses related to products or services provided by approved vendors, so franchisees bear the risk of defects, delays, or unavailability of products or services.