How does Fly Fitness's Item 8 restrictions on suppliers affect the franchisee's initial investment costs outlined in Item 7?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
We have identified various suppliers, distributors and manufacturers of equipment, fixtures, inventory, and services that your Franchised Business must use or provide which meets our standards and requirements. You must purchase all inventory, equipment, computer systems and certain software from our designated suppliers and contractors or in accordance with our specifications. We maintain written lists of approved items of equipment, fixtures, inventory, and supplies (by brand name and/or by standards and specifications) and a list of designated suppliers and contractors for those items. We will update these lists periodically and issue the updated lists to all franchisees.
We approve suppliers after careful review of the quality of the products they provide to us and our franchisees. If you would like us to consider another item or supplier, you must make such request in writing to us and have the supplier give us samples of its product or service and such other information that we may require. If the item and/or supplier meets our specifications, as we determine in our sole discretion, we will approve it as an additional item or supplier. We will make a good-faith effort to notify you whether we approve or disapprove of the proposed item or supplier
within 30 days after we receive all required information to evaluate the product or service. If we do not approve any request within 30 days, it is deemed unapproved. We reserve the right to revoke approval of any item or supplier that does not continue to meet our then-current standards. Our criteria for approving items and suppliers are not available to you. If you request that we approve a proposed item or supplier, we may charge for our actual costs of product testing and evaluation.
We and our affiliates currently do not receive any revenue, rebates, discounts, or other material consideration from any other suppliers based on your required purchases of products, supplies or equipment; however, we may do so in the future, and any rebates or discounts we receive may be kept by us in our sole discretion. We and our affiliates have not received any revenue from franchisees required purchases or leases as of the date of this Disclosure Document.
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, Item 8 outlines restrictions on the sources of products and services, which directly impacts the initial investment costs detailed in Item 7. Fly Fitness mandates that franchisees must purchase all inventory, equipment, computer systems, and certain software from designated suppliers and contractors who meet the franchisor's standards and specifications. These standards are maintained in written lists of approved items and suppliers, which Fly Fitness updates periodically.
This requirement means a prospective Fly Fitness franchisee cannot shop around for the lowest prices on these essential items. Instead, they are limited to the suppliers approved by Fly Fitness. While Fly Fitness states they approve suppliers after careful review of product quality, the franchisee is still bound to these pre-approved sources. If a franchisee wishes to use an alternative supplier or item, they must request approval from Fly Fitness, which may involve providing samples and other information. Fly Fitness has 30 days to approve or disapprove the request; failure to respond within 30 days is deemed a disapproval. Fly Fitness also reserves the right to revoke approval of any item or supplier that no longer meets their standards.
The impact on initial investment costs is that the franchisee may face higher expenses than if they were allowed to source their own equipment and supplies. The franchisee bears the risk that Fly Fitness's approved suppliers may not offer the most competitive pricing. Furthermore, if Fly Fitness charges for product testing and evaluation when a franchisee suggests a new supplier, this adds another potential cost. While the FDD states that Fly Fitness and its affiliates do not currently receive revenue, rebates, or discounts from required purchases, they reserve the right to do so in the future, which could further influence supplier choices without necessarily benefiting the franchisee's bottom line.
Therefore, a prospective Fly Fitness franchisee should carefully consider the potential financial implications of these restrictions. They should inquire about the typical price range for required equipment and supplies from approved vendors and understand the process for suggesting alternative suppliers. It would also be prudent to investigate whether Fly Fitness intends to receive any financial benefits from these supplier relationships in the future, as this could affect the pricing and availability of essential items.