Can the Endless Summer Sweets franchisor require franchisees to join a purchasing cooperative?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.4 Market Cooperatives. Franchisor may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas.
If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative.
If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market
Cooperative within thirty (30) days. Franchisor shall not require Franchisee to be a member of more than one Market Cooperative. If Franchisor establishes a Market Cooperative:
- (a) Governance.
Each Market Cooperative will be organized and governed in a form and manner and shall commence operations on a date determined by Franchisor.
Franchisor may require the Market Cooperative to adopt bylaws or regulations prepared by Franchisor.
Unless otherwise specified by Franchisor, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
Franchisor will be entitled to attend and participate in any meeting of a Market Cooperative.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, franchisees may be required to join a market cooperative under certain conditions. If a Market Cooperative exists for the franchisee's geographic area when they begin operations, they must immediately become a member. If a Market Cooperative is established after the franchisee has commenced operations, they are required to join within thirty days. However, Endless Summer Sweets will not require a franchisee to be a member of more than one Market Cooperative.
Endless Summer Sweets determines the organization, governance, and start date of any Market Cooperative. The franchisor can also mandate that the Market Cooperative adopt bylaws or regulations they prepare. Unless Endless Summer Sweets specifies otherwise, the activities of each Market Cooperative are decided by a majority vote of its members. The franchisor retains the right to attend and participate in any meeting of a Market Cooperative.
While the FDD excerpt specifies that franchisees may be required to join a "Market Cooperative", it does not specifically mention "purchasing cooperatives". It is important to note the distinction between these two types of cooperatives. Market cooperatives typically focus on advertising and promotional activities, while purchasing cooperatives focus on leveraging the collective buying power of members to obtain better prices on supplies and inventory. Prospective franchisees should seek clarification from Endless Summer Sweets regarding whether these Market Cooperatives engage in group purchasing or if membership in a purchasing cooperative is required under a different provision of the franchise agreement.