Can Beard Papas designate itself or its affiliates as the exclusive suppliers of source-restricted goods and services?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
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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. We may charge you a fee equal to the costs and expenses that we incur in reviewing and evaluating an alternate supplier, product, and/or service requested by you.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 26–29)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, Beard Papas has the authority to designate itself or its affiliates as the exclusive suppliers of certain goods and services that are considered "source restricted." These are goods and services that must adhere to Beard Papas's specific standards and must be purchased from approved or designated suppliers, which may include Beard Papas itself or its affiliates.
This means that as a franchisee, you may be required to purchase certain items, such as system supplies, signage, and branded marketing materials, exclusively from Beard Papas or its designated suppliers. The FDD indicates that during the fiscal year ending December 31, 2024, Beard Papas's affiliate, Muginoho Global PTE, Ltd., earned $624,661.44 in revenue from franchisee purchases as an approved supplier of frozen dough. Additionally, Beard Papas earned $459,862.40 in rebates from franchisee purchases, representing 19.6% of their total revenue of $2,348,295.
The FDD estimates that purchases from these designated suppliers could account for approximately 50% to 75% of your total initial investment in establishing the franchised business and about 25% to 50% of the ongoing operating expenses. While franchisees do not receive any material benefits for using these designated suppliers, Beard Papas and its affiliates may receive rebates, payments, and other benefits from these suppliers based on franchisee purchases.
If a franchisee wishes to use an alternative supplier, they must submit a written request for approval, along with any requested information, samples, and testing data. Beard Papas may charge a fee to review and evaluate the proposed supplier. Approval is not guaranteed and is based on factors such as the supplier's ability to meet Beard Papas's standards, quality control, and whether the approval will advance the overall interests of the Beard Papas system. This system of approved suppliers is common in franchising to maintain quality and consistency across all locations, but it also means franchisees have less control over sourcing and costs.