What do the System Standards regulate for a Golden Krust Caribbean Restaurant?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
UCTS AND SERVICES**
Approved Suppliers & Distributors
You are obligated to operate the restaurant according to our System Standards. System Standards may regulate, among other things, the types, models and brands of required fixtures, furnishings, equipment, signs, materials and supplies to be used in operating the restaurant, required or authorized products and product categories and designated or approved suppliers of such items (which may be limited to or include us or our affiliates). We require you to purchase or lease all of your restaurant's equipment from designated or approved suppliers.
In order to maintain the quality of the goods and services sold by Golden Krust restaurants and the reputation of our franchise network, you are obligated to purchase all Jamaican patties, jerk seasonings, jerk sauce, jerk chicken and substantially all of your breads, cakes and other baked goods from designated suppliers, which include our affiliate, Golden Krust Caribbean Bakery, Inc. Some of our shareholders own an equity interest in Golden Krust Caribbean Bakery, Inc. and some of our shareholders own an equity interest in Park Central, both of which are designated suppliers. In addition, as noted in Item 1, certain members of our board of directors and our shareholders operate companies that distribute products to our franchisees including IJBR, GK SDI, and GK NW. In the fiscal year ended December 31, 2023, based upon sales to franchisees, IJBR had revenue of $1,730,000, GK SDI had revenue of $703,673.81, and GK NW had revenue of $334,353.29. The price you pay for food products from our affiliate vary depending on the location of your restaurant and quantities purchased. The prices charged to these suppliers by the manufacturer are equivalent to market prices.
Golden Krust Caribbean Bakery, Inc. does not charge the same prices to individual/entities who are not franchisees. In 2023, the books and records of Golden Krust Caribbean Bakery, Inc., showed total sales of food products and seasonings to franchisees (including sales to distributors who re-sold to franchisees) were approximately $13,422,762.20. We do not collect any revenue from sales made to franchisees. Certain franchised units operated by employees of ours or of related entities and family members (and their heirs) who are shareholders of ours or of our related entities do not pay the same prices for food products and seasonings purchased from Golden Krust Caribbean Bakery, Inc.
Additionally, you are obligated to purchase all other food or restaurant products from sources approved or designated by us. Equipment and fixtures for your restaurant must meet our minimum standards and specifications. Our standards and specifications may impose minimum requirements for delivery, performance, design and appearance. We will notify you in our Brand Standards Manual or other communications of our standards and specifications and/or names of approved suppliers.
We do not provide material benefits to our franchisees based on their use of approved sources or their purchase of particular products or services.
Except as described above, neither Golden Krust nor its affiliates currently derive revenue or other material consideration as a result of required purchases or leases. There currently are no purchasing or distribution cooperatives. Golden Krust currently has the right at some point in the future to negotiate purchase arrangements with suppliers for the benefit of franchisees, and/or to derive revenue or other material consideration as a result of required purchases or leases, but intends to do so only if there will be a net cost savings to franchisees from the particular arrangement
Method of Approving Suppliers & Distributors
If you want to use any item that does not comply with System Standards or is to be purchased from a supplier that has not yet been approved, you must first submit sufficient information, specifications and samples for our determination whether the item complies with System Standards or the supplier meets approved supplier criteria. We may charge you a reasonable fee to cover the costs we incurs in making this determination and will, within sixty (60) days, notify you of our decision. We will, from time to time, establish procedures for submitting requests for approval of items and suppliers and may impose limits on the number of approved items and suppliers.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 15–16)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, franchisees are obligated to operate their restaurants according to the System Standards set by the company. These standards govern various aspects of the business, including the types, models, and brands of required fixtures, furnishings, equipment, signs, materials, and supplies. The System Standards also dictate the required or authorized products and product categories, as well as the designated or approved suppliers from whom these items must be purchased or leased. Golden Krust Caribbean Restaurant requires franchisees to purchase or lease all restaurant equipment from designated or approved suppliers.
To maintain the quality and reputation of the Golden Krust Caribbean Restaurant brand, franchisees must purchase all Jamaican patties, jerk seasonings, jerk sauce, jerk chicken, and substantially all breads, cakes, and other baked goods from designated suppliers, including Golden Krust Caribbean Bakery, Inc., an affiliate of the franchisor. The prices for food products from the affiliate may vary based on the restaurant's location and the quantities purchased. Franchisees are also obligated to purchase all other food or restaurant products from sources approved or designated by Golden Krust Caribbean Restaurant. Equipment and fixtures must meet the franchisor's minimum standards and specifications, which may impose minimum requirements for delivery, performance, design, and appearance.
If a franchisee wants to use an item that does not comply with System Standards or purchase from a non-approved supplier, they must submit sufficient information, specifications, and samples for Golden Krust Caribbean Restaurant to determine compliance. The franchisor may charge a reasonable fee for this determination and will notify the franchisee of their decision within 60 days. Golden Krust Caribbean Restaurant estimates that approximately 75% to 90% of a franchisee's total purchases and leases in establishing and operating a restaurant will be subject to these restrictions.
In addition to these purchasing requirements, franchisees must obtain and maintain insurance coverage as required by Golden Krust Caribbean Restaurant, including comprehensive liability insurance ($1,000,000 per occurrence, $2,000,000 aggregate) for property damage, bodily injury, and death, blanket contents (approximately $500,000), business interruption (approximately $500,000), theft (approximately $30,000), employee benefit liability (approximately $1,000,000), and automobile liability (approximately $1,000,000) coverage. All insurance policies must name Golden Krust Caribbean Restaurant as an additional insured party. The cost of this coverage will vary depending on the insurance carrier's charges, terms of payment, and the franchisee's history.