Does Beggars Pizza receive money or other benefits from approved or designated suppliers?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
We negotiate purchase arrangements with some or all of our approved or designated suppliers and we may receive money or other benefits from approved or designated suppliers as a result of your purchases. As of the date of this disclosure document, there are no purchasing or distribution cooperatives. We do not provide material benefits to you based on your purchase of particular products or services or your use of designated or approved suppliers, other than the benefit of our negotiated pricing, but we may terminate your Franchise Agreement if you purchase from unapproved sources in violation of your Franchise Agreement.
We estimate that 95% of your expenditures for leases and purchases in establishing the Restaurant and on an ongoing basis will be for goods and services that are subject to sourcing restrictions (that is, for which suppliers must be approved by us or which must meet our standards or specifications).
[Item 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES]
You must purchase all spaghetti sauces, pizza sauce spices, cheeses, sausages, pizza dough, spice blends, and paper products used at the Restaurant from us, an affiliate, or a supplier we designate or approve. We have developed certain proprietary, confidential, and trade secret recipes that are part of the System including pizza dough, spaghetti and pizza sauces, sausage, and secret spice blends. We may develop additional trade secret food ingredients. We sell these products through Begcom or other designated suppliers. In addition, Begcom is the designated supplier of certain additional food items and supplies, some of which bear the Proprietary Marks, and we may specify certain other parties as designated suppliers for specified products, materials, supplies, paper goods, fixtures, furnishings, and equipment used or sold at the Restaurant. You must purchase such items from Begcom or the other designated suppliers to assure the uniform quality and image associated with the System and the Restaurant. You must only use revolving baking ovens we designate or approve in the Restaurant.
We derived no revenues during our fiscal year ending December 31, 2024, from required franchisee purchases. In the year ending December 31, 2024, Begcom derived approximately $6,398,528 in revenue from the sale of approved products to our franchisees and our affiliateowned Beggars Pizza® Restaurants. Beg Adv, Inc. derived approximately $252,148 in rebates or commissions from required franchisee purchases and affiliate-owned Beggars Pizza® Restaurant
purchases from our designated and approved suppliers; specifically, it received rebates for purchases of sodas (approximately $3.00 per gallon), food and paper products (flat fee ranging from approximately $1.00 to $7.00), meat and other pizza toppings ($0.10 per pound), and pizza sauce ($1.00 to $1.50 per case). All rebates, including those generated by affiliate-owned locations, were contributed to the Brand Fund operated by Beg Adv, Inc. and described in Item 11. Laurance Garetto and Cheryl Garetto own an interest in Begcom.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 15–18)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the company does receive money or other benefits from approved or designated suppliers as a result of franchisee purchases. Specifically, Beg Adv, Inc., an affiliate, derived approximately $252,148 in rebates or commissions from required franchisee and affiliate-owned Beggars Pizza Restaurant purchases from designated and approved suppliers in the year ending December 31, 2024. These rebates were for purchases of sodas (approximately $3.00 per gallon), food and paper products (flat fee ranging from approximately $1.00 to $7.00), meat and other pizza toppings ($0.10 per pound), and pizza sauce ($1.00 to $1.50 per case). All rebates, including those generated by affiliate-owned locations, were contributed to the Brand Fund operated by Beg Adv, Inc.
This arrangement is common in franchising, where franchisors negotiate with suppliers and receive rebates or commissions based on the volume of purchases made by franchisees. For a prospective Beggars Pizza franchisee, this means that the cost of goods may be influenced by these negotiated arrangements. While Beggars Pizza states that they do not provide material benefits to franchisees based on these purchases other than negotiated pricing, franchisees are obligated to purchase from approved sources. Failure to do so could result in termination of the Franchise Agreement.
Beggars Pizza estimates that 95% of a franchisee's expenditures for leases and purchases in establishing the Restaurant and on an ongoing basis will be for goods and services that are subject to sourcing restrictions. This high percentage underscores the importance of understanding the approved supplier network and the potential impact of these arrangements on a franchisee's profitability. The franchisee is responsible for the costs of evaluation and testing of any proposed supplier not already approved by Beggars Pizza.
Furthermore, franchisees must purchase specific items like spaghetti sauces, pizza sauce spices, cheeses, sausages, pizza dough, spice blends, and paper products from Beggars Pizza, an affiliate, or a designated/approved supplier. Begcom, owned by Laurance and Cheryl Garetto, is the designated supplier for certain food items and supplies. Franchisees are also required to enter into Begcom's Commissary Agreement for the purchase of designated products. These requirements ensure uniformity and quality control within the Beggars Pizza system, but also limit the franchisee's flexibility in sourcing products and potentially impact their costs.