Is Engineering For Kids obligated to remit funds received from suppliers to franchisees?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
We may enter into arrangements with manufacturers of program supplies and materials as well as equipment (together "Products") to make those Products available to Engineering For Kids Businesses at favorable prices and other terms. If so, we will use our best efforts to maintain purchasing arrangements for Products throughout the term of this Agreement, although we do not represent or guarantee that Products will be available on any specific terms. In order for us to negotiate favorable arrangements with suppliers of Products, it is beneficial for all Engineering For Kids Businesses to combine their purchasing power. Accordingly, except as provided below, you must purchase all of your requirements of Products from the suppliers with whom we have established purchasing programs for Engineering For Kids Businesses. You agree to purchase Products solely for the operation of your Franchised Business and conducting Programs and not for use in any other business or resale or redistribution to any other party. Subject to applicable law, we may earn money from the suppliers based on your purchases in the form of rebates, commissions, or other payments. You acknowledge that these payments compensate us for the cost of negotiating and maintaining the purchasing arrangements with the suppliers and that, subject to applicable laws, we have no obligation to remit the funds to you.
Source: Item 23 — RECEIPTS (FDD pages 53–138)
What This Means (2025 FDD)
According to the 2025 Engineering For Kids Franchise Disclosure Document, Engineering For Kids may establish purchasing arrangements with suppliers of program supplies, materials, and equipment, referred to as "Products," to make them available to franchisees at favorable prices. Franchisees are generally required to purchase these Products from Engineering For Kids' approved suppliers to leverage combined purchasing power.
Engineering For Kids may receive compensation from these suppliers in the form of rebates, commissions, or other payments based on franchisee purchases. The FDD explicitly states that these payments are intended to compensate Engineering For Kids for negotiating and maintaining these purchasing arrangements with suppliers.
Importantly, the FDD clarifies that Engineering For Kids has no obligation to remit these funds to franchisees, subject to applicable laws. This means that Engineering For Kids retains any rebates, commissions, or payments received from suppliers, and franchisees do not have a direct claim to these funds. This arrangement is fairly common in franchising, where franchisors often negotiate supplier agreements and receive compensation for their efforts.