How does the Kidokinetics requirement to purchase from approved suppliers (Item 8) relate to the franchisee's obligations to maintain quality standards (Item 9), and what happens if the approved suppliers are more expensive than other options?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
You must operate your Kidokinetics Business according to our System and specifications. This includes purchasing or leasing products, services, supplies, equipment, computer hardware and software, and inventory related to establishing and operating the Kidokinetics Franchise under our specifications, which may include purchasing these items from: (i) our designees; (ii) approved suppliers; and/or (iii) us or our affiliates. You must not deviate from these methods, standards and specifications without our prior written consent, or otherwise operate in any manner which reflects adversely on our Marks or the System.
Our confidential franchise operations manual ("Franchise Operations Manual") states our standards, specifications and guidelines for all products and services we require you to obtain in establishing and operating your Kidokinetics Franchise and approved vendors for these products and services. We will notify you of new or modified standards, specifications and guidelines through periodic amendments or supplements to the Franchise Operations Manual or through other written communication (including electronic communication such as email or through a system-wide intranet).
You must purchase, install, maintain in sufficient supply and use equipment, signs and supplies that conform to the standards and specifications described in the Franchise Operations Manual or otherwise in writing.
Many of the products, supplies and services discussed above may only be purchased from approved suppliers in accordance with the Franchise Operations Manual. We will provide you with a list of these items and services and their approved suppliers, which may include or be limited to us or an affiliate. We are approved suppliers of the proprietary business management software. We or our affiliate are the exclusive provider of the Enhanced Business Coaching and Training Services for your Kidokinetics Businesses and of the marketing materials and services including the Initial Marketing Package. We are also an approved supplier of logoed items, such as uniforms, packaging supplies and other items bearing the Marks, but we may approve alternate suppliers in our discretion.
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, franchisees are required to operate their Kidokinetics business according to the Kidokinetics system and specifications, which includes purchasing or leasing products, services, supplies, equipment, computer hardware and software, and inventory from designees, approved suppliers, or Kidokinetics itself. This is directly tied to maintaining the quality and standards of the Kidokinetics brand, as franchisees must not deviate from these methods without prior written consent. The Franchise Operations Manual outlines the standards, specifications, and guidelines for all required products and services, as well as approved vendors. Franchisees must also install and maintain equipment, signs, and supplies that conform to the standards in the Franchise Operations Manual.
Kidokinetics's approval process for suppliers focuses on their dependability, reputation, ability to supply sufficient quantities, and the prices and quality of their products or services. While franchisees can propose alternative suppliers, Kidokinetics reserves the right to inspect the supplier's facilities and products and may require the franchisee to cover the costs of evaluation. Kidokinetics will notify the franchisee of their decision within 60 calendar days of receiving all necessary information. Kidokinetics also reserves the right to re-inspect approved suppliers and revoke approval if they fail to meet current criteria.
While the FDD emphasizes the requirement to use approved suppliers to maintain system standards, it does not explicitly state what happens if these approved suppliers are more expensive than other options. However, the document does state that Kidokinetics may receive rebates or volume discounts from suppliers and may derive income from franchisee purchases from approved suppliers. The franchisee is responsible for paying all invoices to suppliers. Franchisees are responsible for technology costs, including computer hardware and software, internet access, and license fees. A franchisee can request approval of an unapproved supplier, but Kidokinetics has the right to retain any discounts received from designated suppliers, whether based on purchases made by Kidokinetics or by franchisees directly.
Given the lack of explicit information on cost discrepancies, a prospective Kidokinetics franchisee should directly ask the franchisor about the potential for higher costs from approved suppliers and whether there are any mechanisms to mitigate these costs, such as price matching or access to volume discounts. Understanding the balance between adhering to quality standards and managing expenses will be crucial for the franchisee's financial success.