How do the Exit restrictions on suppliers (Item 8) affect the franchisee's ability to meet their obligations (Item 9)?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
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ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
You must purchase all stationery, merchandising material and/or anything else that is utilized by you that contains EXIT's logo and/or Marks from EXIT's Approved Suppliers or Suppliers that sign a Confidentiality and License Agreement with EXIT. EXIT, through its Affiliate, Ah$um America, Inc., maintains a list of Approved Suppliers. If you wish to have a supplier designated as "Approved," you may submit information about the supplier and its relevant products or services to Ah$um America, Inc. for review. Ah$um America, Inc. will not unreasonably withhold its approval of any supplier that meets the quality standards set forth in the EXIT Training Manual and agrees to sign Ah$um America, Inc.'s then current Terms and Conditions document for Approved Suppliers. Ah$um America, Inc. will notify you of its decision within 60 days of your submission. Ah$um America, Inc. reserves the right to re-inspect the products or services of any Approved Supplier and revoke its approval if the service or product fails to meet the quality standards set forth in the EXIT Training Manual. Ah$um America, Inc. will send written notice of any revocation to the Approved Supplier. Ah$um America does not impose a fee or cost for Supplier approval.
Ah$um America, Inc. applies the following general criteria in approving a proposed Supplier:
- (a) Ability to make Product in conformity with EXIT's specifications;
- (b) Production, supply considerations and delivery capability;
- (c) Reputation and integrity of Supplier;
- (d) Financial condition and insurance coverage of Supplier.
Approved Suppliers are sent written notice of any modifications in EXIT quality standards.
EXIT is the only approved supplier for certain computer software for the Franchise report system known as MEMO. You must purchase a compatible computer for the Franchise MEMO system. The computer requirements are described in ITEM 11. The MEMO system has been developed and will be licensed by EXIT to you. There is no initial cost for the system. You must pay a monthly license fee of $250.00. If you own more than 1 EXIT Franchise, and those are operated by the same legal entity and use the same trade name, the monthly license fee for the second and subsequent Franchise Agreements shall be reduced to 25% of the monthly license fee charged at the time the subsequent Franchise Agreement(s) is signed.
You must comply with quality standards and specifications described in EXIT's Training Manuals for furnishings, fixtures, equipment and operating supplies.
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, Item 8 outlines restrictions on approved suppliers, which directly impacts a franchisee's obligations as detailed in Item 9. Specifically, franchisees must purchase stationery, merchandising material, and anything with Exit's logo from approved suppliers or those who have a confidentiality and license agreement with Exit. This restriction ensures brand consistency and quality control, which are part of the franchisee's obligations to maintain Exit's standards and policies as mentioned in Item 9.
Exit, through its affiliate Ah$um America, Inc., maintains a list of approved suppliers. If a franchisee wants to use a different supplier, they can submit the supplier's information to Ah$um America, Inc. for review. Approval will not be unreasonably withheld if the supplier meets Exit's quality standards and agrees to sign the terms and conditions for approved suppliers. This process ensures that franchisees have some flexibility while still adhering to Exit's standards. Ah$um America, Inc. can re-inspect and revoke approval if a supplier fails to meet quality standards, providing ongoing quality control.
Item 9 lists the franchisee's obligations, including compliance with standards and policies, and ongoing product/service purchases. The restrictions on suppliers in Item 8 directly relate to the obligation for ongoing product/service purchases. Franchisees must adhere to the approved supplier list for certain items, affecting their ability to choose freely. This requirement is further detailed in the Training Manual, which establishes standards for approved suppliers and the types of products and services for which they must be used. The estimated cost of these required purchases is 3.0% to 12.0% of the total cost to establish and operate the Exit franchise, including items like exterior signs, office supplies, yard signs, and MEMO fees.
Exit is the only approved supplier for the MEMO computer software, requiring franchisees to purchase a compatible computer and pay a monthly license fee of $250.00. This specific requirement further restricts the franchisee's choice of suppliers and adds to their financial obligations. However, if a franchisee owns multiple Exit franchises operated by the same legal entity and trade name, the monthly license fee for the second and subsequent franchises is reduced to 25% of the standard fee. In 2024, Exit received $1,370,925.52 from its MEMO software license and access fees, which, along with $246,406.79 in royalties from approved suppliers, constituted 6.9% of Exit's total revenues of $19,674,709.52. These financial arrangements highlight the importance of approved suppliers and the MEMO system to Exit's revenue model and the franchisee's operational costs.