Can Deck Medic designate itself or its affiliates as the exclusive suppliers of source-restricted goods and services, even if there are competing suppliers?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
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 exclusive supplier irrespective of the existence of competing suppliers.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 19–22)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, Deck Medic can designate itself or its affiliates as the exclusive suppliers of certain goods and services, even if other suppliers exist. These are termed "source restricted goods and services," which must meet Deck Medic's specifications and/or be purchased from an approved or designated supplier.
This means that as a Deck Medic franchisee, you may be required to purchase specific items, such as semi-transparent oil-based stains and stripping/cleaning products, exclusively from Deck Medic, its affiliates, or designees like DM Supplies. In fact, the FDD states that approximately 90% of your total purchases and leases in establishing the Franchised Business and approximately 90% of the on-going operating expenses of the Franchised Business will be from designated exclusive suppliers. While Deck Medic may negotiate purchase agreements with suppliers, there are no purchasing or distribution cooperatives that franchisees must join.
Deck Medic's affiliate, DM Supplies, is currently an approved supplier of certain inventory items, including semi-transparent oil-based stains and stripping/cleaning products. DM Supplies receives a rebate of 3% from all franchisee purchases from Sherwin Williams. During the fiscal year ending December 31, 2023, DM Supplies earned $3,498.23 in revenue from franchisee purchases that were made during the fiscal year ending December 31, 2022.
If a franchisee wishes to use a non-approved supplier, they must submit a written request, potentially pay a review and testing fee, and allow facility inspections. Deck Medic has the discretion to withhold approval, considering factors like the supplier's ability to meet standards, quality control, and whether the approval advances the System's overall interests. This system allows Deck Medic to maintain quality control and consistency across all franchise locations but also limits the franchisee's ability to shop for potentially lower prices or preferred vendors.