Does Engel & Volkers have the right to designate or approve suppliers?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
training courses organized by Franchisor, Franchisee shall not be entitled to claim provision of the service unless it takes the necessary action to receive the service.
- 5.4 Approved Suppliers: Franchisor has the right to designate or approve, from time to time, one or more third parties (hereinafter called a "Supplier" or "Suppliers"), which Supplier may be Franchisor or one of its affiliates, to supply Franchisee with certain products and services, including supplies to be used in Franchisee's Residential Real Estate Brokerage.
If Franchisor does so designate or approve a Supplier, Franchisee shall purchase the categories of products or services only from Suppliers so designated or approved by Franchisor. Franchisor, or one or more of its affiliates, may be the sole approved Supplier.
Franchisor may concentrate purchases with one or more Suppliers to obtain lower prices, better advertising support and/or better services for any group of franchisees. If Franchisee proposes to contract for or purchase products or services from any supplier that Franchisor has not previously designated or approved for such products or services, Franchisee must notify Franchisor in writing and submit to Franchisor all information, specifications and samples that Franchisor requests. Any products or services from Suppliers must be in accordance with the then-current ENGEL & VÖLKERS System standards. Such approval of any products or services will be made by Franchisor based on samples that have been provided to it. Franchisor reserves the right to require that samples from the proposed Supplier be delivered to Franchisor or its designated testing facility for evaluation and testing. Franchisor will have sole discretion as to whether or not to approve any supplier. Approval of a Supplier as to any products or services must be made by Franchisor in writing and may also be conditioned on requirements relating to the frequency of delivery, standards of service, including prompt attention to complaints, concentration of purchases and other criteria, and may be conditioned on the supplier providing Franchisor with adequate insurance protection, the Supplier's execution of reasonable indemnity and confidentiality agreements, and the Supplier's payment of reasonable license fees to Franchisor if the Trademarks are to be used, and may be temporary or conditional, pending Franchisor further evaluation of the Supplier.
Franchisor reserves the right to re-inspect, at any time, the products and/or services of any approved Supplier and to revoke the approval upon the Supplier's failure to continue to meet any of Franchisor's then current criteria.
Franchisor and/or its affiliates may realize a profit or receive payments, rebates, discounts or other allowances in connection with Franchisee's purchases of products or services from approved Suppliers, and Franchisor and/or its affiliates may retain those profits, payments, rebates, discounts or other allowances for its own account without having any obligation to provide any benefits to Franchisee.
FRANCHISOR MAKES NO WARRANTY WITH RESPECT TO ANY PRODUCTS, SERVICES, EQUIPMENT, SUPPLIES OR OTHER ITEMS FRANCHISOR APPROVES AND FRANCHISOR EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY SUCH PRODUCTS, EQUIPMENT (INCLUDING WITHOUT LIMITATION AND ANY REQUIRED COMPUTER SYSTEMS), SUPPLIES, OR OTHER APPROVED ITEMS.
5.5 Systemwide Supply Contracts:
Franchisee acknowledges that Franchisor may, in the exercise its business judgment, enter into exclusive and non-exclusive supply contracts for programs, products, supplies, equipment, materials, other items, or services to be used or sold either by all or a subset of Residential Real Estate Brokerages situated within one or more geographic regions (each, a "Systemwide Supply Contract").
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, Engel & Volkers retains significant control over the supply chain and vendor relationships for its franchisees. If Engel & Volkers designates or approves specific suppliers, franchisees are obligated to purchase products or services only from those approved sources. Engel & Volkers, including its affiliates, can even act as the sole approved supplier. This allows Engel & Volkers to standardize products and services across the franchise network.
If a franchisee wishes to use a supplier not already approved by Engel & Volkers, they must seek written approval from Engel & Volkers. The franchisee needs to provide all necessary information, specifications, and samples requested by Engel & Volkers. Engel & Volkers has the right to require that samples from the proposed supplier be delivered to them or a designated testing facility for evaluation. The approval decision rests solely with Engel & Volkers.
Engel & Volkers can also re-inspect the products or services of any approved supplier and revoke the approval if the supplier fails to meet Engel & Volkers' current criteria. Furthermore, Engel & Volkers and its affiliates may receive profits, rebates, discounts, or other allowances from the franchisee's purchases from approved suppliers, which they can retain without any obligation to share with the franchisee. This system allows Engel & Volkers to maintain quality control and potentially generate additional revenue through supplier relationships, but it also limits the franchisee's autonomy in choosing suppliers and potentially impacts their costs.
Engel & Volkers also has exclusive cooperation arrangements with service companies, such as banks and insurance companies. Franchisees are obligated to work exclusively with these companies, unless they have legitimate commercial or financial reasons to refuse. However, Engel & Volkers has the right to retain any commissions or event sponsorships earned due to any such cooperation required by Franchisee. Franchisees may propose service companies or sponsoring vendors to Engel & Volkers for approval, but the determination is in Engel & Volkers' business judgment.