I own a franchise. Is corporate allowed to take the rebate checks from our food / drinks providers?
6 attorney answers
I agree with my colleague. You need to review the disclosures in Item 8 of your FDD. You should have a franchise attorney take a look as well. Usually franchisors cover themselves with appropriate disclosures, but not always. And it seems like things drastically and suddenly changed, which is another reason to carefully consider the scope of disclosures made. Good luck !
Kevin B. Murphy, B.S., M.B.A., J.D.
Franchise Attorney & Franchise Expert
Director of Operations - Mr. Franchise
FRANCHISE FOUNDATIONS APC
I will add, even if it is in your FDD, which is likely, if the franchisor's course of action was to allow franchisees to have the rebates, over a long period of time (several years), such that the franchisees have come to rely on receiving the rebates all this time, it may be that you have a valid argument for enforcing the course of action that both parties have been performing and agreeing to, despite language to the contrary in the FDD...a modification by course of conduct argument. If this is substantial, and over many years, I would definitely make this argument (through an attorney); it certainly can be a valid issue for an Arbitrator to decide without appearing to be adversary as to the franchise relationship in general. Just this issue. And if the franchisor has many many franchisees who can make this argument, and potentially lose and get bad press, it may be that they would be willing to settle quietly with you on this issue-
The foregoing is for informational purposes only and may not be relied on as attorney-client advice.
Maybe. You will need to review your Franchise Disclosure Document (specifically, Item 8) and your Franchise Agreement to determine the answer. Most franchisors do reserve the right to retain these rebates, but if yours does it must be disclosed in the FDD.
The issue of franchisor rebates is one of the most contested areas of the franchise relationship. As my colleagues have pointed out, whether the franchisor is entitled to the rebates will depend on the language in both the FDD and the franchise agreement. You should also evaluate any correspondence with the franchisor regarding rebates, as some past promises by the franchisor may be enforceable.
This response is not intended as legal advice or to establish an attorney-client relationship. It is for informational purposes only.
What do your FDD and franchise agreement say?
The information above is for informational purposes only and it not intended, and should not be taken, as legal advice. Your receipt of this information does not create an attorney-client relationship and you should not act on this information without consulting an attorney.
Yes they can take rebates, however, it should have been disclosed in the FDD - look at Item 8 to determine if it was disclosed; this is a mandatory requirement in the Amended FTC Guidelines. If it was not disclosed then you may want to contact an attorney experienced in franchise law.