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Vendor Rebates: Franchising’s Dirty Little Secret

On Behalf of | Dec 4, 2019 | Franchise Agreements

In my previous column, I introduced readers to the often shockingly one-sided and overly aggressive nature of a vast number of franchise agreements. Ronald K. Gardner, Franchising From the Franchisee Lawyer Perspective, Law.com (Sept. 27, 2019). In my next few columns, I want to explore the “undisclosed” or less obvious issues that exist in franchising. And while there are many places I could start, none is more critical, or more often abused, than vendor rebates.

For the uninitiated, a vendor rebate is exactly what it sounds like—i.e., a payment by a vendor based on purchases made from that vendor. Most frequently, this payment is made to someone in compensation for bringing volume purchases or exclusivity (or both) to the vendor. In essence, in exchange for meeting certain criteria, the vendor shares its profit with the customer to incentivize continued or higher volume business.

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