What obligations does a Carbones Pizzeria franchisee have regarding approved suppliers in Item 8, and how do these obligations relate to the insurance requirements in Item 9?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
CES OF PRODUCTS AND SERVICES**
Because of the unique character of Carbone's pizza, you may only purchase from our approved suppliers various items including all food ingredients in the production of pizzas. The reason for the requirement is that the recipes for these products are unique and original, and it is in your interest and the interest of other franchisees and of M & T Pizza that the taste, texture and other qualities of these products be as consistent as possible. The grant or revocation of approval for a particular supplier will be communicated directly to you. Revocation will generally only occur upon the failure of the supplier to meet our standards. If you would like us to consider approving a supplier or an alternative item that we have not approved, or for which we have not revoked our approval, you must provide us with all information we request regarding the supplier or item. We will then have 30 days from the date you provide us the information to consider the supplier. We do not make our criteria available for approving suppliers or items. We do not charge a fee for our investigation or approval. We will not consider approving a supplier or item for which we only have a single supplier or item.
We have the right to designate a single source or sources from whom you must purchase any required products and services, and we and/or our affiliates may be that single source or one or more of the sources. We and our affiliates may derive revenue from your purchases or leases of goods, services, supplies, fixtures, equipment, inventory, products and other items from our suppliers. We and our affiliates may receive rebates from various suppliers based upon franchisee purchases from the suppliers. These rebates may be based on a flat amount or percentage of franchisee purchases. Currently, these rebates range from $1 to $10 per case purchased depending upon the item purchased to 1-7% of the amount paid by the franchisee for the product, depending on the product. Our affiliate also receives a flat amount from one supplier to our franchise system. During our fiscal year ended October 31, 2024, our affiliate received $159,266 in revenue from rebates paid to it based on franchisee purchases, of which $30,000 was contributed to our Advertising Fund. This information is taken from our affiliate's internal financial statements.
We have sole suppliers for pizza and spaghetti sauce packets, certain seasonings, frozen doughballs, pizza sausage and all products or other items that are branded with our name or trademarks. Additionally, you may only use our sole approved design firm for creating and publishing advertising for your Restaurant.
All items to be purchased by you in the operation of your Restaurant, including ingredients, food stuffs, other food items, apparel, pizza boxes and other packaging, linens, flatware, supplies, furnishings, fixtures, insurance, point of sale system and other miscellaneous items must meet our standards as we may change them from time to time. Such standards typically relate to the quality and appearance of products so as to promote uniformity in all franchised restaurants. Any changes in the standards will be communicated to you. You may not deviate from the specific ingredients, or the recipes for the items you sell unless we otherwise approve those changes.
What This Means (2025 FDD)
According to the 2025 FDD, Carbones Pizzeria franchisees are required to purchase various items, including all food ingredients used in pizza production, exclusively from the franchisor's approved suppliers. This requirement is due to the unique character of Carbone's pizza and the need to maintain consistency in taste, texture, and quality across all franchise locations. The franchisor will communicate any approvals or revocations of suppliers directly to the franchisee, with revocations typically occurring if a supplier fails to meet the franchisor's standards. If a franchisee wishes to propose a new supplier or alternative item, they must provide all requested information to Carbones Pizzeria, which then has 30 days to consider the supplier. However, the franchisor does not disclose its criteria for approving suppliers or items and will not consider a supplier if there is only a single supplier or item available.
Carbones Pizzeria retains the right to designate a single source for required products and services, which may include the franchisor or its affiliates. The franchisor and its affiliates may receive revenue or rebates from franchisee purchases from these suppliers, with rebates ranging from $1 to $10 per case or 1-7% of the amount paid by the franchisee, depending on the product. During the fiscal year ended October 31, 2024, the franchisor's affiliate received $159,266 in revenue from rebates, with $30,000 contributed to the Advertising Fund.
The FDD states that all items purchased by the franchisee, including ingredients, food items, apparel, pizza boxes, linens, supplies, furnishings, fixtures, and insurance, must meet the franchisor's standards. Franchisees must also carry the types and amounts of insurance specified by Carbones Pizzeria and name the franchisor as an additional insured (excluding workers' compensation policies). Franchisees are required to provide 30 days' notice before any changes, cancellations, or terminations of any insurance policy. While the FDD mentions insurance requirements, it does not explicitly link the approved supplier obligations in Item 8 to the specific insurance requirements detailed in Item 9. However, it is implied that using approved suppliers helps maintain product quality and consistency, which could indirectly affect insurance-related risks and liabilities.