What does the Red Wagon Club Franchise Agreement say about approved distributors and suppliers?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees to use the manufacturers, vendors, distributors, suppliers, and producers (collectively referred to herein as "suppliers") that Franchisor specifies or approves for all aspects of the development and operation of Franchisee's RWC Business for which such suppliers provide goods or services. Franchisor also reserves the right to periodically approve or designate the terms and distribution methods for any goods or services. Franchisor may, at its option, arrange with designated suppliers to collect or have its affiliates collect fees and expenses associated with products and services they provide to Franchisee and, in turn, pay the supplier on Franchisee's behalf for such products or services. If Franchisor elects to do so, Franchisee agrees that Franchisor or its affiliates may auto-debit Franchisee's bank account for such amounts in the same manner and using the same authorization that Franchisee grants Franchisor with respect to payment of Program Fee and other fees. Franchisor or any of its affiliates may be a supplier, or otherwise party to these transactions, and may derive revenue or profit from such transaction. Franchisor and any of its affiliates may use such revenue or profit without restriction.
If Franchisee would like Franchisor to consider approving a supplier that is not then approved by Franchisor, Franchisee must submit a written request before purchasing any items or services from that supplier. Franchisor will make all determinations about whether to approve an alternative supplier or product based on its then-current criteria, which may change periodically. Franchisor is not required to respond to Franchisee's request, and any actions Franchisor takes in response to Franchisee's request will be at Franchisor's sole and unfettered discretion, including the assessment of a fee to compensate Franchisor for the time and resources Franchisor spends in evaluating the proposed supplier. Franchisor may, with or without cause, revoke Franchisor's approval of any supplier at any time.
Source: Item 22 — CONTRACTS (FDD page 47)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, franchisees must use only the manufacturers, vendors, distributors, suppliers, and producers that Red Wagon Club specifies or approves for all aspects of the development and operation of the franchisee's business where these suppliers provide goods or services. Red Wagon Club also reserves the right to periodically approve or designate the terms and distribution methods for any goods or services.
Red Wagon Club may arrange with designated suppliers or have its affiliates collect fees and expenses associated with products and services they provide to the franchisee and then pay the supplier on the franchisee's behalf. If Red Wagon Club chooses to do so, the franchisee agrees that Red Wagon Club or its affiliates may auto-debit the franchisee's bank account for such amounts, using the same authorization the franchisee grants for payment of the Program Fee and other fees. Red Wagon Club or any of its affiliates may be a supplier or otherwise party to these transactions and may derive revenue or profit from such transactions, which they can use without restriction.
If a franchisee wants Red Wagon Club to consider approving a supplier not currently approved, they must submit a written request before purchasing any items or services from that supplier. Red Wagon Club will decide whether to approve an alternative supplier or product based on its current criteria, which may change. Red Wagon Club is not required to respond to the franchisee's request, and any actions Red Wagon Club takes will be at its sole discretion, including charging a fee to compensate Red Wagon Club for evaluating the proposed supplier. Red Wagon Club can revoke approval of any supplier at any time, with or without cause.
This level of control over suppliers is common in franchising to maintain quality and consistency across the brand. However, it also means franchisees may not be able to source cheaper alternatives, and they are dependent on Red Wagon Club's negotiated terms with suppliers. The potential for Red Wagon Club or its affiliates to profit from these supplier relationships should be considered, as it could influence their approval decisions.