Does Alloy require franchisees to purchase or lease real estate from them or their affiliates?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES*
In order to ensure a uniform image and uniform quality of services and products throughout the Alloy system, you must maintain and comply with our quality standards. Although you are not required to purchase or lease real estate from us or our affiliates, we must accept the location of your Alloy Facility (see Item 11). You must construct and equip your Franchised Business in accordance with our then current approved design, specifications and standards. In addition, it is your responsibility to ensure that your building plans comply with the Americans with Disabilities Act and all other federal, state and local laws.
We reserve the right to designate a primary or single source of supply for certain required items, and we or an affiliate may be that single source. We have required vendors for equipment, our online POS and related technology services and printed marketing and promotional materials. We also reserve the right to require you to use a designated accountant or bookkeeping service if you do not provide required financial reports and statements when they are due, or your financial reports and statements are not accurate. For other items, we have a list of preferred vendors for your consideration, although you may use another vendor provided the vendor's product or service meets our specifications or standards.
You must maintain in sufficient supply (as we may prescribe in the Manual or otherwise in writing), and use at all times, only the products purchased from suppliers designated or approved by us, and any other products, materials, supplies, fixtures, furnishings, equipment, computer systems, signs, and other items as conform with our standards and specifications, and not deviate from those standards and specifications by the use of non-conforming items without our prior written consent. A complete list of our approved products and suppliers will be included in the Manual and is subject to change over time.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 25–29)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees are not required to purchase or lease real estate from Alloy or its affiliates. However, Alloy must approve the location of the franchisee's facility. The franchisee is responsible for constructing and equipping their franchised business according to Alloy's current approved design, specifications, and standards. Additionally, franchisees must ensure their building plans comply with the Americans with Disabilities Act and all other applicable federal, state, and local laws. Alloy also reserves the right to review any lease, sublease, or purchase agreement for the approved site before the franchisee signs it, and the franchisee and landlord must sign Alloy's form of Lease Addendum if requested.
While Alloy does not mandate real estate transactions with them, they maintain significant control over the location and physical setup of the Alloy facility. This ensures uniformity across all franchise locations, which is a common practice in franchising to maintain brand consistency. The franchisee bears the responsibility for ensuring compliance with legal requirements like the Americans with Disabilities Act, highlighting the importance of due diligence in site selection and construction.
Alloy also has the right to collect and retain any and all allowances, rebates, credits, incentives, or benefits (collectively, "Allowances") offered by manufacturers, suppliers, and distributors to the franchisee, to Alloy, or to its affiliates based upon the franchisee's purchases of products and services from manufacturers, suppliers, and distributors. For the fiscal year ended December 31, 2024, Alloy collected $221,972 in Allowances, which was 5.48% of their overall revenue of $4,048,688, as reported in their audited financial statements included as Exhibit G to this Disclosure Document.
This arrangement allows Alloy to potentially benefit financially from the franchisee's purchasing activities, which could impact the franchisee's overall costs and profitability. Prospective franchisees should carefully consider these factors and seek clarification from Alloy regarding the specific criteria for site approval and the potential financial implications of the allowance collection policy.