Can Desi District implement a centralized purchasing system?
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.
- 8.6 Product Recalls. If Desi District Franchise Group or any vendor, supplier, or manufacturer of an item used or sold in Franchisee's Business issues a recall of such item or otherwise notifies Franchisee that such item is defective or dangerous, Franchisee shall immediately cease using or selling such item, and Franchisee shall at its own expense comply with all instructions from Desi District Franchise Group or the vendor, supplier, or manufacturer of such item with respect to such item, including without limitation the recall, repair, and/or replacement of such item.
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 option to implement a centralized purchasing system. This means that Desi District can establish a system where franchisees are required to purchase supplies and other items through a central source managed by the franchisor. Desi District also has the right to establish a purchasing cooperative that franchisees would be required to join.
This system allows Desi District to negotiate prices and terms with vendors on behalf of all franchisees within the system. Desi District may also receive rebates, payments, or other forms of consideration from vendors based on the purchases made by franchisees. Furthermore, Desi District has the right to collect payments from franchisees on behalf of a vendor, remit those payments to the vendor, and impose a reasonable markup or charge for administering the payment program.
While Desi District has the right to implement a centralized purchasing system, the Franchise Disclosure Document specifies that they will not have any liability to the franchisee for any claim or loss related to any product provided or service performed by any Approved Vendor or Required Vendor. This includes, but is not limited to, defects, delays, or unavailability of products or services. If there is a recall of an item used or sold in the franchisee's business, the franchisee must immediately stop using or selling the item and comply with all instructions from Desi District or the vendor, supplier, or manufacturer, including recall, repair, or replacement of the item at the franchisee's own expense.
For a prospective franchisee, this means they may be required to participate in a centralized purchasing system if Desi District chooses to implement one. While this could potentially lead to cost savings through negotiated prices, it also means the franchisee may be limited in their choice of vendors and could be subject to additional charges for the administration of the payment program. Additionally, the franchisee bears the risk of product defects, delays, or unavailability, as Desi District assumes no liability in these matters.