It’s possible that they do, not least because in some cases the franchisor is the manufacturer or wholesaler of bespoke, branded items and makes its profit from such markups rather than from management services fees. What matters is that however franchisors earn from their franchisees the overall level of fees is fair. It’s also possible that items purchased from a franchisor’s nominated or approved supplier will include a kick-back or retrospective discount which will be paid direct to the franchisor.

There is nothing wrong with such arrangements but it is good practice that they should be transparent and notified to the franchisees. Indeed the British Franchise Association believes that to keep such practices secret is unethical on the part of the franchisor and of any advisor who suggests they do so.

Some franchisors use the funds generated for a specific purpose such as, for example, subsidising the annual conference or indeed contributing to the cost of the staff member who is responsible for negotiations with suppliers. In other examples the total discount negotiated by the franchisor for their network may be sufficiently high that it can be split between themselves and the franchisees so that both parties benefit.

However the money is spent it represents one of the benefits of being part of a network which is able to command advantageous terms for its members which are greater than individuals could ever obtain for themselves.

Brian Duckett

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