Can Hck Hot Chicken designate itself as the sole supplier of goods or services to the franchisee?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
- 9.2.1 Franchisee may purchase authorized Non-Proprietary Products from: (i) Franchisor or its Affiliates (if they sell the same); (ii) Suppliers designated or approved in writing by Franchisor; or (iii) Suppliers selected by Franchisee and approved in writing by Franchisor prior to Franchisee making such purchase(s); provided, however, that if this is one of the first three Restaurants developed by Franchisee or its Affiliates, Franchisee must purchase certain Non-Proprietary Products that Franchisor designates only from Franchisor or Suppliers it designates, including new equipment for all items that impact food production and the guest experience, and large equipment and small wares.
Nothing in this Section shall require Franchisor to approve any Supplier, and without limiting Franchisor's right to approve or disapprove a Supplier in its discretion, Franchisee acknowledges that it is generally disadvantageous to the system from a cost and service basis to have more than one Supplier in any given market area and that among the other factors Franchisor may consider in deciding whether to approve a proposed Supplier, it may consider the effect that such approval may have on the ability of Franchisor and its Franchisees to obtain the lowest distribution costs and on the quality and uniformity of products offered system-wide.
Without limiting the foregoing, Franchisor may disapprove a proposed Supplier, if in Franchisor's opinion, the approval of the proposed Supplier would disrupt or adversely impact Franchisor's national or regional distributional arrangements.
Franchisor may also determine that certain Non-Proprietary Products (e.g. beverages) shall be limited to a designated brand or brands set by Franchisor which brand(s) it may change from time to time.
9.3 Purchases from Franchisor or its Affiliates.
- 9.3.1 When and if Franchisor begins to manufacture and/or distribute goods, products or supplies, all goods, products, and supplies purchased from Franchisor or its Affiliates shall be purchased in accordance with the purchase order format issued from time to time by Franchisor (or the applicable Affiliate), the current form of which shall be set forth in the HCK Hot Chicken Brand Standards Manual, and in accordance with the policies set forth in the HCK Hot Chicken Brand Standards Manual, if any.
Franchisor (or such Affiliate) may change the prices, delivery terms and other terms relating to its sale of goods, services, products, and supplies ("Goods and Services") to Franchisee on prior written notice, provided, that such prices shall be the same as the prices charged to similarly situated Franchisees (excluding shipping, transportation, warehousing, insurance and related costs and expenses).
Such prices shall be Franchisor's (or the Affiliate's) then-current prices, which may change from time to time.
Franchisee further acknowledges that prices the Franchisor (or the applicable Affiliate) charges to Franchisee may include a profit to Franchisor and may be higher than Franchisor's (or its Affiliate's) internal prices allocated or charged to Franchisor or Affiliate-owned Restaurant.
- 7.7 Utensils, Fixtures and Other Goods.
All products to be used in the operation of the business including tableware, flatware, utensils, glasses, menus, and other like articles used in connection with the Franchised Restaurant shall conform to Franchisor's specifications, shall be imprinted with Franchisor's Marks, if and as specified by Franchisor, and shall be purchased by Franchisee from a Supplier approved in writing by Franchisor, as provided in Section 9 of this Agreement.
- 7.14.5 If Franchisor has enabled the Intranet to facilitate Franchisee ordering goods and products from Franchisor and other vendors, then to the maximum extent possible, Franchisee shall order and purchase through the Intranet all good and products available for purchase through the Intranet.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, franchisees may be required to purchase certain items from Hck Hot Chicken or its designated suppliers, especially during the initial phase of their franchise operation. Specifically, for one of the first three restaurants developed by a franchisee or its affiliates, certain non-proprietary products must be purchased from Hck Hot Chicken or its designated suppliers. This includes new equipment impacting food production and the guest experience, as well as large and small wares.
For other authorized non-proprietary products, franchisees have the option to purchase from Hck Hot Chicken or its affiliates (if they sell them), suppliers designated or approved by Hck Hot Chicken, or suppliers selected by the franchisee but approved in writing by Hck Hot Chicken. However, Hck Hot Chicken retains the right to disapprove a proposed supplier if its approval would disrupt national or regional distribution arrangements or negatively impact the ability to obtain the lowest distribution costs and maintain product quality and uniformity across the system. Hck Hot Chicken may also limit certain non-proprietary products, such as beverages, to specific brands.
When Hck Hot Chicken begins to manufacture and/or distribute goods, products, or supplies, franchisees must purchase these items according to Hck Hot Chicken's purchase order format and policies. Hck Hot Chicken can change the prices and delivery terms for these goods and services, provided the prices are the same as those charged to similarly situated franchisees, excluding costs like shipping and insurance. These prices may include a profit for Hck Hot Chicken and may be higher than the internal prices allocated to company-owned restaurants. Hck Hot Chicken can also discontinue the sale of any goods or services if it deems it unfeasible, unprofitable, or undesirable.
Franchisees are also generally required to order and purchase goods and products through Hck Hot Chicken's intranet when available. All products used in the operation of the business, including tableware, utensils, and menus, must conform to Hck Hot Chicken's specifications and be purchased from an approved supplier. This gives Hck Hot Chicken significant control over the supply chain and product standards within its franchise system.