Does a franchisor receive commission from suppliers a franchisee is obliged to use?

The majority of franchisors do recommend that franchisees make use of nominated suppliers. This is a ‘win-win’ for both the franchisor and its franchisees because the franchisor can usually negotiate much better terms with suppliers than would be the case if individual franchisees tried to do so. As a result, franchisors are often able to claim that although franchisees have to pay continuing fees, the advantages they receive from discounts offered by nominated suppliers outweighs the ‘downside’ of these payments. The advantage for franchisors is that if franchisees obtain their essential supplies from nominated suppliers the franchisor is in a position to ensure the quality of those supplies is maintained, which is an important element for franchisors who generally do not want there to be substantial variations between the quality of products or equipment supplied or used by franchisees.  The important thing is that franchisees are able to obtain items more cheaply through the franchisor, or its nominated suppliers, than they would be able to do so otherwise, and in such circumstances some franchisors do receive some sort of payment or discount from suppliers. The only difficulty arises where the franchisor is not transparent and has not informed its franchisees that it is receiving a payment.