Does HydroDog seek to promote the overall interests of the HydroDog Businesses system when negotiating purchase arrangements with suppliers?

According to HydroDog's 2025 Franchise Disclosure Document, HydroDog and its affiliates negotiate purchase arrangements with suppliers for the benefit of both franchisees and the company itself. These negotiations include price terms for items and services that franchisees must obtain from approved suppliers. HydroDog states that in these negotiations, they seek to promote the overall interests of the HydroDog Businesses system.

However, the FDD also indicates that HydroDog or its affiliates may receive rebates or other consideration from unaffiliated suppliers based on franchisee purchases. For example, HydroDog has negotiated agreements with Groomer's Choice and Evan's Apparel, where they receive a 15% rebate on franchisee purchases. These rebates are retained by HydroDog to offset the costs of operating the franchise system and are not shared with franchisees. This creates a potential conflict of interest, as HydroDog may be incentivized to choose suppliers that offer higher rebates, even if those suppliers do not offer the best prices or terms for franchisees.

The FDD also states that HydroDog does not provide material benefits to franchisees, such as renewal or granting additional franchises, based on their purchase of particular products or services or use of particular suppliers. This suggests that franchisees are not penalized for choosing suppliers that are not preferred by HydroDog, as long as those suppliers are approved and meet HydroDog's standards. However, franchisees are still required to purchase a significant portion of their supplies and services from approved suppliers, with these purchases and leases representing approximately 70%-100% of their total purchases and leases in establishing, and approximately 80% of their total purchases and leases in operating, their HydroDog Business.

Prospective franchisees should carefully consider the potential conflicts of interest that may arise from HydroDog's rebate agreements with suppliers. They should also evaluate whether the approved suppliers offer competitive prices and terms compared to other suppliers in the market. It would be prudent to discuss these issues with existing HydroDog franchisees to gain a better understanding of their experiences with the approved suppliers and the impact of the rebate agreements on their businesses.