Can Extreme Art Studio or its affiliates derive revenue from Extreme Art Studio franchisee purchases from designated suppliers?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
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Studio Business may require you, your owners and their respective spouses to sign a personal guarantee.
2.2 OPERATING ASSETS.
You agree to use in operating the Franchised Business only those products, signs, inventory, supplies and equipment ("Operating Assets") that we approve for Extreme Art Studio Businesses as meeting our standards and specifications for customer service, quality, design, appearance, function and performance. We will advise you on necessary pre-opening procedures and assist you with inventory ordering of products, equipment and supplies through our affiliate or other suppliers. If you operate an Extreme Art Studio Business, you must submit construction plans and specifications to us for our approval before you begin construction at the Studio. You may, but are not required to use our approved construction management supplier to manage the entire build out and construction of your Studio. If you elect to use the approved construction management supplier, you will pay any construction management fee directly to our supplier. You will, at your own cost and expense, purchase and install all furnishings, fixtures, equipment, supplies and signage in conformance with the Franchise Operations Manual and our standards and specifications. You agree to place or display at the Franchised Business the Operating Assets as required by us from time to time. You agree to purchase or lease approved brands, types or models of Operating Assets in accordance with Section 8.3 of this Franchise Agreement.
2.3 COMPUTER SYSTEM.
- 2.3.1 You must obtain and use the computer hardware and software that we designate ("Computer System") for each of your Extreme Art Studio Businesses.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, Extreme Art Studio requires franchisees to use only approved products, signs, inventory, supplies, and equipment, termed "Operating Assets," that meet the franchisor's standards. Extreme Art Studio will advise franchisees on pre-opening procedures and assist with initial inventory orders through its affiliate or other suppliers. While franchisees may use an approved construction management supplier, they will pay any construction management fees directly to that supplier.
Extreme Art Studio also has the right to change or add approved suppliers or vendors for technology services at any time. They can enter into master license agreements with software or technology suppliers and sublicense the software or technology to franchisees, charging franchisees based on their usage. Additionally, Extreme Art Studio can create proprietary software or technology that franchisees must use, requiring them to enter into a license agreement and pay initial and ongoing licensing, support, and maintenance fees.
While the FDD states that Extreme Art Studio assists with inventory ordering through its affiliate or other suppliers, the document does not explicitly state whether Extreme Art Studio or its affiliates receive payments or commissions from these designated suppliers based on franchisee purchases. A prospective franchisee should clarify with Extreme Art Studio whether such financial arrangements exist and, if so, what the nature and extent of those benefits are.