Does Deck Medic have the discretion to negotiate purchase agreements with designated suppliers for source-restricted goods and services?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
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Purchase Agreements and Cooperatives
We may, in our discretion, negotiate purchase agreements, including price terms, with designated suppliers for source restricted goods and services on behalf of the System. We may establish preferred vendor programs with suppliers on behalf of some or all of the Deck Medic Businesses under the System and, in doing so, we may limit the number of approved vendors and/or suppliers that you may purchase from and we may designate one vendor as your sole supplier. We have entered into a purchase agreement with Sherwin Williams for certain System Supplies, comprised of select products and equipment, that must be purchased for use in your Deck Medic Business. We have also entered into a purchase agreement with Image 360 for the service vehicle wraps that you must purchase for your service vehicle. There are no purchasing or distribution cooperatives for source restricted products or services that you must join. You may receive material benefits for using our designated or approved suppliers.
Our Right to Receive Compensation and Our Revenue from Source Restricted Purchases
We and/or our affiliates may receive rebates, payments and other material benefits from suppliers based on franchisee purchases and we reserve the right to institute and expand rebate programs in the future. During the fiscal year ending December 31, 2023, we did not earn any revenue from approved suppliers based on our franchisees' purchases. Our affiliate DM Supplies receives a rebate of 3% from all franchisee purchases from Sherwin Williams.
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 retains the discretion to negotiate purchase agreements, including price terms, with designated suppliers for source-restricted goods and services on behalf of the entire Deck Medic system. This means that Deck Medic can leverage its collective bargaining power to potentially secure better deals for franchisees on essential supplies and services. Deck Medic may also establish preferred vendor programs, limiting the number of approved vendors from which franchisees can purchase. They can even designate a single vendor as the sole supplier.
Deck Medic has already established purchase agreements with Sherwin Williams for certain system supplies and with Image 360 for service vehicle wraps, which franchisees are required to purchase. This indicates that Deck Medic is actively involved in sourcing and negotiating prices for key components of the business. While there are no purchasing or distribution cooperatives that franchisees must join, the FDD states that franchisees may receive material benefits from using Deck Medic's designated or approved suppliers.
It's important for prospective franchisees to understand that Deck Medic and its affiliates may receive rebates, payments, or other benefits from suppliers based on franchisee purchases. For example, DM Supplies, an affiliate, receives a 3% rebate from all franchisee purchases from Sherwin Williams. In 2023, DM Supplies earned $3,498.23 in revenue from franchisee purchases made during the fiscal year ending December 31, 2022. This revenue structure could influence Deck Medic's choice of suppliers and the terms of purchase agreements.
Overall, Deck Medic's ability to negotiate purchase agreements can be a benefit to franchisees by potentially lowering costs and ensuring consistent quality. However, franchisees should be aware of the potential for conflicts of interest if Deck Medic or its affiliates receive compensation from suppliers. It is important to evaluate whether the designated suppliers offer competitive pricing and quality compared to alternative sources.