What does 'source-restricted' mean regarding goods and services for an Itan Salon?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Source-Restricted Purchases and Leases - Generally
You must purchase or lease certain source-restricted goods and services for the development and operation of your Salon. "Source-restricted" means the good or service must meet our specifications or must be purchased from an approved or designated supplier (in some cases, an exclusive designated supplier, which may be us or
an affiliate). The Manual includes our specifications and supplier list. We notify you of changes to our specifications and suppliers by email, updates to the Manual or other means of communication.
Supplier Criteria
Our criteria for evaluating suppliers include standards for: (a) quality, performance, design, appearance and price of the product or service; and (b) dependability, production capabilities, reputation and financial strength of the supplier. Upon request, we will provide you with any objective specifications pertaining to our evaluation of a supplier or product, although certain important subjective criteria (e.g., product appearance, design, functionality, etc.) are important to our evaluation but cannot be described in writing.
If you wish to purchase or lease a source-restricted item from a non-approved supplier, you must send us: (a) a written request for approval; (b) product samples for testing purposes; and (c) all additional information we request. The supplier must agree to comply with our minimum insurance, indemnification and confidentiality requirements for system suppliers and allow us to periodically inspect their facility. We may also require that the supplier sign a license agreement with us if the products will bear our Marks. We will notify you of our decision within 30 days after we receive all required information and product samples. We may periodically reinspect approved products and suppliers and revoke our approval if a product or supplier fails to meet our then-current criteria. You must reimburse all costs we incur to evaluate products and suppliers you propose.
Current Source-Restricted Purchases and Leases
We estimate nearly 95% of the total purchases and leases to establish your Salon and 85% of ongoing operating expenses will consist of source-restricted goods or services, as further described below.
Lease
We do not review the terms of your lease.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 18–21)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, "source-restricted" means that certain goods and services required for developing and operating an Itan salon must either meet Itan's specifications or be purchased from an approved or designated supplier. In some cases, these suppliers may be exclusive, and could even be Itan or one of its affiliates. The specific requirements and a list of approved suppliers are detailed in Itan's Manual, with updates communicated via email or other means.
Itan estimates that nearly 95% of the total purchases and leases to establish a Salon and 85% of ongoing operating expenses will consist of source-restricted goods or services. This includes items such as fixtures, furnishings, décor, certain operating equipment like tanning beds, technology systems, signage, and inventory. For instance, franchisees must purchase FIT Bodywrap® exclusively from FDTC and TANOLOGY® and BRONZE LUMINESSENCE™ skincare products and CALIFORNIA SPA® Ageless Serum exclusively from Itan's affiliates.
If a franchisee wishes to use a non-approved supplier for a source-restricted item, they must submit a written request, product samples, and any other required information to Itan for approval. The supplier must also meet Itan's insurance, indemnification, and confidentiality requirements, and potentially sign a license agreement if the products bear Itan's trademarks. Itan will then notify the franchisee of their decision within 30 days. Itan may also periodically reinspect approved products and suppliers and revoke approval if they no longer meet the current criteria, with the franchisee responsible for reimbursing all evaluation costs.
Itan attempts to negotiate purchase agreements with suppliers for the benefit of franchisees, including favorable pricing terms. As of the date of the 2025 Disclosure Document, Itan has negotiated purchase agreements with suppliers for FIT Bodywraps®, tanning lamps, teeth whitening trays, and take-home whitening pens. While there are currently no purchasing cooperatives, Itan may establish them in the future. Franchisees primarily benefit from using designated or approved suppliers by gaining access to any discounted pricing that Itan negotiates.