FDD Item 8
Restrictions on Sources of Products and Services
FDD Item 8 discloses any restrictions on where the franchisee can purchase products, services, supplies, or equipment. It identifies any franchisor-designated or approved suppliers, and any rebates the franchisor receives from those suppliers.
Why It Matters
Item 8 reveals how much purchasing flexibility the franchisee has and whether the franchisor profits from the supply chain. Supplier rebates flowing back to the franchisor are a hidden revenue stream that affects franchisee economics.
What Item 8 Must Disclose
- Restrictions on sources of products and services
- Designated or required suppliers (including any franchisor affiliates)
- Approved-supplier program terms and approval process
- Revenue or rebates the franchisor receives from required or approved suppliers
- Whether franchisees can become approved suppliers
What to Look For
- Required purchases from franchisor affiliates — pricing may exceed market rates
- Large supplier rebates flowing to the franchisor — a hidden tax on franchisees
- Short, restrictive approved-supplier lists — limits operational flexibility
Go Deeper
FDD Item 8 Decoded: Franchise Supply Chain and Vendor Requirements
Item 8 of the Franchise Disclosure Document reveals how supply chain costs will shape your profitability. Learn what required vs. approved suppliers mean, how franchisor rebates work, how to evaluate vendor markup transparency, and the questions to ask franchisees about real supply costs during due diligence.