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Does a franchisor get commission from suppliers to the franchisee network?
One of the advantages of being part of a franchised network is that franchisees ought to be able to purchase goods or services at a far better rate than they would as a sole operator. The franchisor usually negotiates the special price and may then arrange for each franchisee to deal directly with the supplier, or he may purchase items centrally and pass them on in smaller quantities to the franchisees. If the franchisor buys and re-sells the goods in question he is likely to make a mark-up, if only to cover handling costs. Where franchisees order individually, the franchisor has the choice of whether to pass on the entire benefit of his negotiations to the franchisees or to accept a commission, or retrospective discount, from the supplier. There is no reason why a franchisor should not do the latter, provided he is open about such arrangements. We have at least one client who puts all the commissions he receives into a fund that pays for a large proportion of the cost of the annual franchisee conference, which seems to me to be an excellent idea.
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