Does Chocolate Fish Coffee derive revenue from required purchases and leases by franchisees?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
nd Our Affiliates
We will derive revenue from the required purchases and leases by franchisees. Because we are a new franchisor, our total revenue in 2023 was $0. Our revenue from all required purchases and leases of products and services by franchisees in the prior fiscal year was $0. The percentage of our total revenues that were from required purchases or leases in the prior fiscal year was 0%.
Proportion of Required Purchases and Leases
We estimate that the required purchases and leases to establish your business are 50% to 80% of your total purchases and leases to establish your business.
We estimate that the required purchases and leases of goods and services to operate your business are 50% to 80% of your total purchases and leases of goods and services to operate your business.
Payments by Designated Suppliers to Us
We do not currently receive payments from any designated suppliers based on purchases by you or other franchisees. However, the franchise agreement does not prohibit us from doing so.
Purchasing or Distribution Cooperatives
No purchasing or distribution cooperative currently exists.
Negotiated Arrangements
We do negotiate purchase arrangements with suppliers, including price terms, for the benefit of franchisees. However, we may do so in the future.
Benefits Provided to You for Purchases
We do provide material benefit to you based on your purchase of particular goods and services and your use of particular suppliers.
Item 9 FRANCHISEE'S OBLIGATIONS
**This table lists your principal obligations under the franchise and other agreements.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 16–18)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, Chocolate Fish Coffee does derive revenue from required purchases and leases by franchisees. As a new franchisor, Chocolate Fish Coffee's total revenue in 2023 was $0, and its revenue from all required purchases and leases of products and services by franchisees in the prior fiscal year was also $0, representing 0% of total revenues. However, the FDD indicates that franchisees are required to purchase specific equipment and supplies, as well as coffee products and inventory, directly from Chocolate Fish Coffee. Chocolate Fish Coffee also reserves the right to be the sole supplier of goods or services in the future.
This arrangement means that a portion of Chocolate Fish Coffee's income is directly tied to the sales of these required items to its franchisees. For a prospective franchisee, this highlights the importance of carefully evaluating the pricing and quality of the products and equipment they are required to purchase from Chocolate Fish Coffee. It also means that the franchisee's costs could be affected if Chocolate Fish Coffee decides to increase prices on these required purchases.
The FDD also states that the estimated required purchases and leases to establish the business are 50% to 80% of the total purchases and leases to establish the business. Similarly, the required purchases and leases of goods and services to operate the business are estimated to be 50% to 80% of the total. This indicates a significant portion of a franchisee's investment and ongoing operational expenses will be directed toward purchases dictated by Chocolate Fish Coffee.
While Chocolate Fish Coffee does not currently receive payments from designated suppliers based on franchisee purchases, the franchise agreement does not prohibit them from doing so in the future. Chocolate Fish Coffee does negotiate purchase arrangements with suppliers for the benefit of franchisees, and provides material benefits based on the purchase of particular goods and services and the use of particular suppliers. Franchisees do have the option to request approval for alternative suppliers, but Chocolate Fish Coffee's criteria for approving suppliers are not available to franchisees.