Does the Franchise Agreement prohibit Southern Steer from receiving payments from designated suppliers based on purchases by franchisees?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
We do not currently receive payments from any designated suppliers based on purchases by You or other franchisees. However, the Franchise Agreement does not prohibit Us from doing so. We may receive income in the form of rebates, discounts, allowances or other payments or credits from designated or approved suppliers that sell products, services, equipment to franchisees and We have the right to determine how those payments will be used. In some cases, prices charged by suppliers to company or affiliate-owned Southern Steer Business may be less than prices charged to franchised Southern Steer Business based on volume, credits, administrative costs, or other factors.
Source: Item 8 — ITEM. 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–24)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, the Franchise Agreement does not prohibit Southern Steer from receiving payments from designated suppliers based on franchisee purchases. While Southern Steer states that as of January 31, 2025, neither they nor their affiliates have derived any revenue from the sales of Goods, Supplies, and Services, they retain the right to receive income from designated or approved suppliers in the form of rebates, discounts, allowances, or other payments or credits. Southern Steer also has the right to determine how these payments will be used.
This arrangement is common in franchising, where franchisors often negotiate volume discounts or rebates with suppliers due to the collective purchasing power of the franchise network. These arrangements can potentially benefit franchisees through lower costs or improved supplier services. However, it also means that Southern Steer has the discretion to use these payments as they see fit, which may not directly benefit the franchisees.
Prospective franchisees should be aware that prices charged by suppliers to company-owned Southern Steer businesses may be less than those charged to franchised Southern Steer businesses due to factors like volume, credits, or administrative costs. This difference in pricing could impact the profitability of individual franchise locations. It is important for potential franchisees to discuss with Southern Steer how these negotiated benefits are distributed and whether there are mechanisms in place to ensure fair pricing across all locations.
In summary, while Southern Steer is not currently receiving payments from suppliers based on franchisee purchases, the Franchise Agreement allows them to do so. This arrangement is not inherently negative, but it does give Southern Steer control over any potential financial benefits derived from supplier relationships, and there may be price discrepancies between company-owned and franchised locations.