When does ‘recommended suppliers’ become ‘third-party enforcement’?

I am a franchisee and have been told that I must use a certain supplier who has just hiked up their rates. Another quality supplier is prepared to sell me the same products at the original rate? Am I bound to use the recommended supplier?

Franchisors recommend suppliers for a variety of reasons, and these are usually based around quality and consistency of product, availability, continuity of supply and after-sales service to ensure system integrity is maintained. The amount of rebate a supplier pays might also play a factor in some selection decisions.

Your obligation to buy from suppliers recommended by the franchisor will be outlined in your franchise agreement.

In systems where an ACCC notification has been received, a franchisee may have no choice but to deal with the named supplier. You should check if an ACCC notification exists, and if not, seek more information from the franchisor, which might help you distinguish between the offers of the two suppliers.

Jason Gehrke is a director of the Franchise Advisory Centre and has been involved in franchising for 18 years at franchisee, franchisor and advisor level. He provides consulting services to both franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues. In his spare time, Jason is a passionate collector of military antiques.