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.
The Purpose of Uniformity
One of the putative benefits of franchising is uniformity. Customers learn to expect the same type of products and services from one location to the next, and through this type of uniformity, franchise systems can build loyalty and goodwill associated with…read more
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