Under the Desi District franchise agreement, does the restriction on purchasing from other sources apply to principal services trademarked by the franchisor?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- (1) Requiring goods, supplies, inventories, or services to be purchased exclusively from the franchisor or sources designated by the franchisor where such goods, supplies, inventories, or services of comparable quality are available from sources other than those designated by the franchisor.
However, the publication by the franchisor of a list of approved suppliers of goods, supplies, inventories, or services or the requirement that such goods, supplies, inventories, or services comply with specifications and standards prescribed by the franchisor does not constitute designation of a source nor does a reasonable right of the franchisor to disapprove a supplier constitute a designation.
This subdivision does not apply to the principal goods, supplies, inventories, or services manufactured or trademarked by the franchisor.
Source: Item 23 — RECEIPTS (FDD pages 52–140)
What This Means (2024 FDD)
According to the 2024 Desi District Franchise Disclosure Document, the restriction on purchasing goods, supplies, inventories, or services exclusively from the franchisor or designated sources does not apply to principal goods, supplies, inventories, or services manufactured or trademarked by Desi District.
This means that while franchisees may generally be able to purchase goods, supplies, inventories, or services from sources other than those specified by Desi District if comparable quality is available, this exception does not extend to items that Desi District manufactures or has trademarked. Franchisees are required to obtain these specific items directly from Desi District or its approved sources, ensuring brand consistency and quality control.
This requirement is a common practice in franchising, as it allows franchisors to maintain standards and protect their brand identity. However, it also means that franchisees may not be able to seek out potentially lower-cost alternatives for these specific, trademarked items, which could impact their operating expenses and profitability. Franchisees should carefully consider these requirements and their potential financial implications.