Are Aerus officers required to disclose if they have an ownership interest in any of Aerus' approved or designated suppliers?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
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Approved and Designated Suppliers
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. Except for certain of our officers' ownership interests in us and our affiliates, our officers do not have an ownership interest in any of our approved or designated suppliers. We derive, and our affiliates may derive, revenue as a result of required purchases or leases by franchisees. Neither we nor any of our affiliates receive rebates from third parties as result of required purchases or leases by franchisees.
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. Our affiliates did not derive any revenue from purchases and leases by franchisees during the fiscal year ending December 31, 2024.
We estimate that required purchases and leases will account for up to 90% of all of your purchases and leases necessary to open a Franchised Business, and up to 8
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 29–33)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, Aerus officers are generally required to disclose if they have an ownership interest in approved or designated suppliers. The FDD specifies that, with one exception, Aerus officers do not have ownership interests in approved or designated suppliers. The exception is that certain officers may have ownership interests in Aerus itself and its affiliates, which are designated suppliers of Consigned Products, other Products, Product components and parts, related accessories, and approved proprietary computer hardware and software programs.
This disclosure is important for prospective franchisees because it provides transparency regarding potential conflicts of interest. If Aerus officers had undisclosed ownership interests in other suppliers, they might be incentivized to require franchisees to purchase from those suppliers, even if those suppliers did not offer the best prices or quality. The disclosure helps franchisees assess whether Aerus's decisions regarding approved suppliers are made in the best interests of the franchise system as a whole.
The FDD also reveals that Aerus and its affiliates are the designated suppliers for a significant portion of the products franchisees are required to purchase. During the fiscal year ended December 31, 2024, Aerus realized approximately $14.41 million in revenue from required purchases and leases by franchisees, which accounted for approximately 91% of Aerus's total revenue of approximately $15.83 million. The FDD estimates that required purchases and leases will account for up to 90% of all of a franchisee's purchases and leases necessary to open a Franchised Business, and up to 80% of their ongoing costs to operate the franchise. This highlights the importance of understanding the terms and conditions of these required purchases and leases.
Prospective franchisees should carefully review Item 8 of the FDD, which details the restrictions on sources of products and services. They should also consider asking Aerus for more information about the specific ownership interests of its officers in Aerus and its affiliates, as well as the process for selecting and approving suppliers. Understanding these relationships and processes can help franchisees make informed decisions about their investment in an Aerus franchise.