Can Extreme Art Studio or its affiliates be a designated or approved supplier or distributor?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
ved Suppliers
You must purchase or lease approved brands, types, or models of products, services, supplies, operating assets, or other items only from suppliers we designate or approve. If we designate products and services to be purchased through approved and/or designated third-party suppliers, then you will purchase those products and services from the designated suppliers in compliance with the terms and in the manner approved by us or our affiliates. Our affiliates or we may be a designated or approved supplier or distributor, or otherwise be a party to these transactions. We may concentrate purchases with one or more manufacturers, distributors, or suppliers to obtain lower prices and/or the best advertising support and/or services for any group of Extreme Art Studio Businesses franchised or operated by us or our affiliates.
Approval of a product or supplier may be conditioned on requirements relating to product quality, prices, consistency, reliability, financial capability, labor relations, customer relations, frequency and speed of delivery, past experience with our affiliates, concentration of purchases, standards of service (including prompt attention to complaints), or other criteria, and may be temporary pending our continued evaluation of the supplier from time to time. All suppliers must meet the standards and specifications established by us. We will not issue to you or any of our approved suppliers our standards and specifications, except as we deem necessary for purposes of production.
If you would like to purchase or use any products, services, operating assets, or materials that we have not approved or from any unapproved supplier, you must submit to us a written request for approval of the proposed product and/or supplier prior to purchasing any such item. We reserve the right to charge you our then-current new product/supplier application fee and require you to reimburse us for our expenses (which will not exceed the reasonable cost of the research and inspection, and the actual cost of the test) to make the evaluation.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 23–26)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, Extreme Art Studio or its affiliates may be designated or approved suppliers or distributors. The FDD states that franchisees must purchase or lease approved brands, types, or models of products, services, supplies, operating assets, or other items only from suppliers that Extreme Art Studio designates or approves. Furthermore, if Extreme Art Studio designates products and services to be purchased through approved and/or designated third-party suppliers, franchisees will purchase those products and services from the designated suppliers in compliance with the terms and in the manner approved by Extreme Art Studio or its affiliates.
Extreme Art Studio's FDD also indicates that Extreme Art Studio or its affiliates may derive additional revenue based on franchisee purchases and leases, including charging franchisees for products or services they provide or from payments made to them by designated or approved suppliers. For example, Extreme Art Studio may receive up to a 20% rebate on licensing fees for DB Software. During the last fiscal year, which ended December 31, 2023, Extreme Art Studio did not derive any revenue from required purchases, supplier rebates, and franchisee leases.
Currently, Extreme Art Studio is the only approved supplier of implementation services. Franchisees are also permitted to use Extreme Art Studio's approved construction management supplier to manage the build-out and construction of their Extreme Art Studio Business, for which the supplier is paid a construction management fee of $20,000. Extreme Art Studio and its affiliates reserve the right to become designated suppliers of additional products, supplies, or materials in the future. Except for ownership interests in Extreme Art Studio, no officers of the franchisor own any interest in any approved supplier.