Franchise supply chain rebate
A franchise supply chain rebate is a rebate, commission, payment or other benefit that a franchisor or its associate receives as a result of franchisees’ purchases of goods and services. In Ontario and Alberta, the disclosure document must say whether any exist and whether they are shared with franchisees.
Ontario’s O. Reg. 581/00 also 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. A buyer working out a unit’s costs can ask who receives such payments and whether any are shared.
What disclosure must cover
Ontario’s O. Reg. 581/00 requires a description of the franchisor’s policy, if any, on volume rebates, and whether the franchisor or its associate receives a rebate, commission, payment or other benefit from franchisee purchases and, if so, whether these are shared with franchisees, directly or indirectly. Schedule 1, item 12 of Alberta’s Franchises Regulation asks the same question under the heading rebates or other benefits to the franchisor.
What to ask
- Which purchases generate a rebate, and who receives it
- Whether any share is passed to franchisees, and how
- Whether the franchisee must buy from an approved supplier
Read the answer against the fees and royalties a franchisee pays.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of OntarioGovernmentO. Reg. 581/00: GENERAL
- 02Government of AlbertaGovernmentFranchises Regulation, Alberta Regulation 240/95
- 03Government of OntarioGovernmentArthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.