Can Desi District require franchisees to purchase or lease Inputs from specific sources?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ranchisee shall comply with any code of ethics or statement of values from Desi District Franchise Group. Franchisee shall not take any action which may injure the goodwill associated with the Marks.
ARTICLE 8. SUPPLIERS AND VENDORS
- 8.1 Generally. Franchisee shall acquire all Inputs required by Desi District Franchise Group from time to time in accordance with System Standards. Desi District Franchise Group may require Franchisee to purchase or lease any Inputs from Desi District Franchise Group, Desi District Franchise Group's designee, Required Vendors, Approved Vendors, and/or under Desi District Franchise Group's specifications. Desi District Franchise Group may change any such requirement or change the status of any vendor. To make such requirement or change effective, Desi District Franchise Group shall issue the appropriate System Standards.
- 8.2 Alternate Vendor Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input only from an Approved Vendor or Required Vendor, and Franchisee desires to purchase the Input from another vendor, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group may condition its approval on such criteria as Desi District Franchise Group deems appropriate, which may include evaluations of the vendor's capacity, quality, financial stability, reputation, and reliability; inspections; product testing, and performance reviews. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed new vendor within 30 days after receipt of Franchisee's request.
- 8.3 Alternate Input Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input, and Franchisee desires to purchase an alternate to the Input, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed alternate Input within 30 days after receipt of Franchisee's request.
- 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.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees are required to acquire all 'Inputs' according to Desi District's System Standards. Desi District has the right to mandate that franchisees purchase or lease any Inputs from Desi District itself, its designee, Required Vendors, or Approved Vendors, or according to Desi District's specifications. These requirements and vendor statuses are subject to change, with Desi District required to issue updated System Standards to reflect such changes.
If Desi District requires a franchisee to purchase a particular Input exclusively from an Approved or Required Vendor, the franchisee can request approval to purchase the Input from an alternate vendor. To do so, the franchisee must submit a written request along with any information, specifications, or samples requested by Desi District. Desi District may base its approval on criteria such as the vendor's capacity, quality, financial stability, reputation, and reliability, as well as inspections, product testing, and performance reviews. Desi District will provide written notification of approval or disapproval within 30 days of receiving the franchisee's request.
Similarly, if a franchisee wishes to use an alternate Input to one that Desi District requires, they must submit a written request for approval, including any necessary information, specifications, and samples. Desi District will then provide written notification of the approval or disapproval of the proposed alternate Input within 30 days of receiving the franchisee's request. This system allows franchisees some flexibility while ensuring that Desi District maintains control over the quality and standards of the products used in its franchises.
Desi District also has the power to negotiate prices and terms with vendors on behalf of the entire franchise system. Desi District may receive rebates, payments, or other consideration from vendors based on franchisee purchases. They can also collect payments from franchisees on behalf of vendors, remit those payments, and impose a reasonable charge for administering this payment program. Desi District may also implement a centralized purchasing system or establish a purchasing cooperative that franchisees are required to join.