Does Kidokinetics reserve the right to limit the number of potential suppliers it may consider for approval?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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We reserve the right to limit the number of potential suppliers we may consider for approval and for some categories of products or services, we may designate a third party or ourselves as exclusive suppliers.
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 retains the right to limit the number of potential suppliers it may consider for approval. For certain product or service categories, Kidokinetics may designate a third party or themselves as the exclusive supplier. This means that as a franchisee, your choice of suppliers for essential business items may be restricted.
Kidokinetics estimates that 30% to 80% of a franchisee's initial expenditures and 25% to 30% of ongoing expenses will be directed towards Kidokinetics or its approved suppliers. While franchisees are required to use approved suppliers, Kidokinetics does not provide additional benefits, such as renewal rights or the ability to open additional locations, based on adherence to these designated sources. However, non-compliance with approved supplier requirements can lead to the termination of the Franchise Agreement.
Kidokinetics may receive rebates from suppliers based on franchisee purchases, without any obligation to pass these savings on to franchisees. During the fiscal year ended December 31, 2023, Kidokinetics generated $511,370 in revenue from required franchisee purchases, specifically from sales of shirts and apparel, representing 14.5% of their total revenue of $3,509,206. This demonstrates the potential financial impact of these supplier restrictions on both the franchisor and franchisee.
If a franchisee wishes to use a non-approved item or service, they must submit it to Kidokinetics for approval, covering all associated expenses. The approval process typically takes around 30 days and focuses on the supplier's dependability, reputation, ability to provide sufficient quantities, pricing, and quality. However, Kidokinetics keeps its specific approval criteria confidential and reserves the right to change these criteria at its discretion.