Supplying Franchisees (Part A)

If you are a franchisor in New York, you may be involved with supplying goods or services to your franchisees. As a franchisor in New York, you may also negotiate supply and distribution agreements for your franchisees. Doing these things would help you regulate your franchise system, as well as the quality of your goods and services.

When supplying franchisees, you may act as the sole supplier of goods or services, or you may be one of several suppliers. As a franchisor in New York, you can choose the suppliers for your franchisees, and set requirements for purchases and sales. You can establish your terms for supplying franchisees within the franchise agreement.

If your franchise in New York is a product-based system, naturally, you are responsible for supplying franchisees. If your franchise is a business format system, however, you should carefully consider supplying franchisees. Supplying franchisees is a complex process. Before you establish the terms of supply in your franchise agreement, you should speak with a New York franchise lawyer.

Establishing Terms for Supplying Franchisees

As a franchisor in New York, you must consider the terms and conditions for the sale of your products and/or services. For example, you must consider:

• the late charges or interest that franchisees will pay on past due accounts;
• whether you will require personal guarantees to cover a franchisee's financial obligations;
• whether you will require purchase money, or blanket security interests, for the items that you sell to franchisees; and
• the effects that these methods have on the franchisee's ability to seek other financing.

You should also be aware that franchisees have become increasingly pro-active in many franchise systems. These days, they often play roles in the supply chain of a franchise. They may do this by forming cooperatives, by establishing franchisee advisory councils, or through associations that advise a franchisor on its operations.

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