Approved supplier

For a franchise buyer, an obligation to buy from approved suppliers limits where stock, supplies or equipment can come from, and Ontario’s O. Reg. 581/00 requires every disclosure document to state that the cost of goods and services acquired under the franchise agreement may not correspond to the lowest cost available in the marketplace. It is a point to read in the franchise agreement and the disclosure document before price is settled.

What the sources say

O. Reg. 581/00 under Ontario’s Arthur Wishart Act lists, among the required disclosure items, obligations to purchase or lease from the franchisor, its associate or suppliers they approve. British Columbia’s Franchises Act treats goods supplied by the franchisor or a supplier it designates as part of one way a franchise arises (s. 1). The Canadian Franchise Association says ordering through approved suppliers may bring preferential pricing or special delivery.

What to ask

• Which items must be bought from listed suppliers, and which are open
• How a supplier gets on or off the list
• Whether the franchisor receives a supply chain rebate on those purchases

Add these to the checks in the franchise agreement.