Read Item 8 supply restrictions and supplier revenue
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Extract each Item 8 obligation to buy or lease from the franchisor, its designee, an approved supplier, or under the franchisor's specifications, including obligations imposed by practice. List supplier-approval steps, officer interests, revenue figures, cooperatives, and any benefit tied to a supplier. Do not approve a supplier.
- What the lawyer must review
- 16 CFR 436.5(h) requires disclosure of the franchisee's obligations to purchase or lease goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, real estate, or comparable items from the franchisor, its designee, suppliers the franchisor approves, or under the franchisor's specifications. The obligation may come from the written agreement or from the franchisor's practice. For each, the item covers the good or service, whether the franchisor or its affiliates are approved or the only approved suppliers, any supplier in which an officer owns an interest, how approval of alternative suppliers is granted and revoked, whether specifications are issued and how they are modified, and whether the franchisor or its affiliates will or may derive revenue or other material consideration, stated on the basis paragraphs (h)(6)(i) through (iv) require. The item also requires the estimated proportion of required purchases and leases, the basis of any payment a designated supplier will make to the franchisor, purchasing or distribution cooperatives, whether the franchisor negotiates purchase arrangements for franchisees, and whether the franchisor provides material benefits based on particular purchases or suppliers. The lawyer checks the disclosure against the agreement and the purchasing practice. ABA Model Rules 1.1 and 5.3 and Formal Opinion 512 leave that check with the lawyer.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes extracting and organising information. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.
Related tasks
Draft or review a franchise disclosure document against the prescribed headingsCheck the franchisor's disclosure and any registration the jurisdiction requiresDraft or review a franchise agreement from the disclosure and the term sheetBuild a franchisee due-diligence issues list from the disclosure pack