Is Kidokinetics required to negotiate purchase arrangements with suppliers and distributors for the benefit of franchisees?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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We may, but are not required to, negotiate purchase arrangements with suppliers and distributors for the benefit of franchisees and the System as a whole, and we may receive rebates or volume discounts from our purchase of equipment and supplies that we resell to you. We currently do not have any purchasing or distribution cooperatives. We do not provide any other material benefits to franchisees for using designated or approved suppliers; however, purchases of unapproved products or from unapproved suppliers in violation of the Franchise Agreement will entitle us to, among other things, terminate the Franchise Agreement. We and our affiliates may receive rebates from some suppliers based on your purchase of products and services and we have no obligation to pass them on to our franchisees or use them in any particular manner. We reserve the right to receive fees or other consideration in exchange for rights licensed or granted, or services rendered to third parties, including vendors. We may derive income, consideration and other benefits from your purchases or lease of any products, services, supplies or other items from us and from approved and designated suppliers. This income may be derived in any form, including as a rebate from various suppliers based on the quantity of System franchisee purchases. We do not guarantee the availability of independent sources of supply for any particular product or service required to establish or operate your Kidokinetics Business.
You will also pay us a Software License Fee of $3,000 prior to opening for our proprietary KIDOLINK software ($1,000 for additional Kidokinetics Businesses). Except as disclosed above, as of the Issuance Date of this Franchise Disclosure Document, neither we, nor our affiliates are approved suppliers of any item, although we may become one in the future. Some of our officers own an equity interest in us, an approved
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 22–24)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Kidokinetics is not required to negotiate purchase arrangements with suppliers and distributors for the benefit of franchisees. However, Kidokinetics retains the option to do so.
The FDD states that Kidokinetics "may, but are not required to, negotiate purchase arrangements with suppliers and distributors for the benefit of franchisees and the System as a whole." This means that while Kidokinetics has the discretion to negotiate better deals for its franchisees, it is not obligated to do so. This is a common practice in franchising, where franchisors often have the ability to leverage their network's collective buying power but are not always mandated to do so.
Kidokinetics also states that they "may receive rebates or volume discounts from our purchase of equipment and supplies that we resell to you." They are not obligated to pass these savings on to the franchisees or use them in any specific way. This is also a fairly common practice, as franchisors may use these rebates to offset other costs or increase their own revenue. Franchisees should be aware that they may not directly benefit from any rebates or discounts Kidokinetics receives.
The document also states that purchasing unapproved products or from unapproved suppliers in violation of the Franchise Agreement will entitle Kidokinetics to terminate the Franchise Agreement. This underscores the importance of adhering to Kidokinetics's approved supplier list, even if franchisees believe they could find better deals elsewhere. Franchisees are also required to pay a Software License Fee of $3,000 prior to opening for the KIDOLINK software ($1,000 for additional Kidokinetics Businesses).