Can Beard Papas or its affiliates be designated as the exclusive supplier for the Beard Papas System?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
ed Purchases and Leases – Generally**
We require that you purchase or lease certain source restricted goods and services for the development and operation of your Shop. Source restricted goods and services are goods and services that must meet our specifications and/or that must be purchased from an approved or designated supplier that may include us or our affiliates. We may designate a supplier, including ourselves or our affiliates, as the exclusive supplier for the System. Our specifications and list of approved and designated suppliers is contained in our Manuals. We will notify you of any changes to our specifications or list of approved or designated suppliers. We may notify you of these changes in various ways, including written or electronic correspondence, amendments and updates to our Manuals, and other forms of communication. We formulate and modify our standards and specifications for products and services based on our industry experience and our management decisions as to the overall operation and expansion of the System. If we have previously approved a supplier, and their standards fall below our designated standards, we will revoke our approval. We will notify you in writing of us revoking our approval.
Suppliers and Supplier Criteria
We may designate ourselves and our affiliates as exclusive suppliers of source restricted goods and services. We may designate ourselves or a third party as the sole and exclusive supplier irrespective of the existence of competing suppliers. If, in the Manuals, we do not designate a supplier for a particular item, you will purchase all such products, supplies and services from suppliers who meet our specifications and standards.
Our affiliate, Muginoho Global PTE, Ltd. is currently designated as an approved supplier of frozen dough. Except for Muginoho Global PTE, Ltd., currently, we are not and our affiliates are not approved suppliers of the source restricted goods and services identified below. Except as to Muginoho Global PTE, Ltd., no officer of ours currently owns an interest in any of our designated suppliers. During the fiscal year ending December 31, 2024, our affiliate Muginoho Global PTE, Ltd. earned $624,661.44 in revenue from franchisee purchases.
If you want to purchase or lease a source restricted item from a supplier that has not been previously approved or designated by us in writing, you must send us a written request for approval and submit additional information, samples, and testing data that we may request.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 26–29)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, Beard Papas has the authority to designate itself or its affiliates as the exclusive suppliers for the Beard Papas system. This means that Beard Papas can mandate that franchisees purchase certain goods and services only from Beard Papas or its affiliated companies, regardless of whether there are other suppliers available.
This ability allows Beard Papas to maintain quality control and standardization across all franchise locations. The FDD specifies that source-restricted goods and services are those that must meet Beard Papas' specifications and/or be purchased from an approved or designated supplier, which may include Beard Papas or its affiliates. The specifications and list of approved suppliers are detailed in the manuals, and Beard Papas will notify franchisees of any changes.
For a prospective franchisee, this means a significant portion of their expenses will be directed to Beard Papas or its affiliates. The FDD estimates that purchases from designated exclusive suppliers will represent approximately 50% to 75% of the total purchases and leases in establishing the Franchised Business and approximately 25% to 50% of the ongoing operating expenses. For example, franchisees are required to purchase system supplies, branded furniture, fixtures, equipment, signage, and branded marketing materials from Beard Papas or its designated suppliers.
Beard Papas also retains the right to receive rebates, payments, and other material benefits from suppliers based on franchisee purchases. In the fiscal year ending December 31, 2024, Beard Papas earned $459,862.40 in rebates from franchisee purchases, which represented 19.6% of their total revenue of $2,348,295. This revenue structure incentivizes Beard Papas to designate exclusive suppliers, as it directly benefits from franchisee spending on these source-restricted items. Franchisees do not receive any material benefits from using these designated or approved suppliers.