How does the estimated initial investment for an Aerus franchise (Item 7) relate to the restrictions on sources of products and services (Item 8)?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 6. Opening inventory of products and supplies will vary based on your expected volume of business, the size of your premises, and the size of any storage areas on the premises. You will order an initial inventory of Consigned Products. The estimate above includes your Security
Deposit for an initial supply of Consigned Products, which Security Deposit is fully earned and payable according to the Manuals at the time of signing of the Franchise Agreement. Also included in the estimate is the cost of an initial supply of parts and supplies. See Item 8 of this Disclosure Document for more information about your purchase requirements.
You must purchase or lease, install and maintain all of the Products, Product parts and components, fixtures, furnishings, equipment (including electronic cash register, or computer hardware and software and administration systems and satellite communications systems), décor items, signs, uniforms and related items that we prescribe in the Manuals or otherwise in writing, which will be made available to you prior to signing the Franchise Agreement.
We have the right to require you to purchase certain approved products and services from us, our affiliates, or other suppliers or providers approved or designated by us, including, for example, Products and other inventory items and supplies, payment processing services, advertising materials, stationery and other printed materials, Product repair equipment, computer hardware and software, electronic cash register and point of sale systems, consumer financing services, approved location décor and signage, and other goods or services necessary to operate a Franchised Business. We and/or our affiliates are presently the designated supplier of Consigned Products and other Products, Product components and parts, related accessories, and approved proprietary computer hardware and software programs.
During our fiscal year ended December 31, 2024, we realized approximately $14.41 million of revenue from required purchases and leases by franchisees, primarily consisting of franchisee purchases of Consigned Products and service and aftermarket parts and accessories. This revenue accounted for approximately 91% of our total revenue of approximately $15.83 million in 2024.
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the initial investment is directly related to the restrictions on sources of products and services. Item 7 mentions that the opening inventory of products and supplies will vary based on factors like expected business volume and premises size. A significant portion of this initial inventory consists of 'Consigned Products,' for which a security deposit is required, impacting the overall initial investment. Item 7 explicitly directs prospective franchisees to Item 8 for further details on purchase requirements.
Item 8 elaborates on these restrictions, stating that franchisees must purchase or lease all prescribed products, parts, fixtures, equipment, and other items from sources approved by Aerus. This includes initial and ongoing inventory of Consigned Products. Aerus also designates the prices for these Consigned Products and requires approval for all sales contracts, warranties, and service contracts. This means franchisees have limited flexibility in sourcing products and must adhere to Aerus's standards and specifications, which directly influences the amount they spend during their initial investment and throughout their operation.
Furthermore, Aerus has the right to require franchisees to purchase certain approved products and services from them, their affiliates, or other designated suppliers. During the fiscal year ended December 31, 2024, Aerus realized approximately $14.41 million of revenue from required purchases and leases by franchisees, primarily from Consigned Products and service parts. This revenue accounted for approximately 91% of Aerus's total revenue of approximately $15.83 million in 2024. This demonstrates the significant financial relationship between Aerus and its franchisees through mandatory purchases, highlighting how the initial investment and ongoing operational costs are tied to these restrictions.