What are the franchisee's obligations regarding pre-opening purchases/leases for Learningrx (Item 9) and how do these relate to the restrictions on sources of products and services (Item 8)?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
| Obligation | Section in Franchise Agreement | Item in Disclosure Document |
|---|---|---|
| b. Pre-opening purchases/leases | Sections 10.02 & 12.6 | 11 |
| i. Restrictions on Products and services offered | Sections 8.03, 12.06 | 8, 16 |
| l. Ongoing Product and service purchases | Section 12 | 8, 16 |
We estimate that the cost of purchases for these Products represents approximately 1.5% of your total purchases in connection with the establishment of your Business, and approximately 1% of your ongoing supplies and materials expenses. We will derive income or other material benefit from these purchases. In the Fiscal Year ended September 30, 2024, our affiliate LearningRx, Inc., received $60,569, which is 3.8% of the total revenue of $1,571,729 from these required purchases.
You must purchase certain marketing materials, equipment, services, supplies, and materials used to operate your franchise from our approved or designated suppliers as indicated in the Operations Manual. For example, for any agreements signed on or after January 1, 2019, Centers are required to use our designative merchant services provider, as specified in the Operations Manual, for receiving payments from clients at your Center. If you would like to purchase items from another supplier, you may request our "Supplier Approval Criteria and Request Form." At no cost to you, upon receipt of the Supplier Approval Criteria and Request Form, we will study the proposed product or service, and within 30 days approve or disapprove the proposed supplier.
Currently, we are the only approved or designated supplier of Products or access through the digital Training Management System. Each student will need 1 or more kits and/or workbooks or access to those kits and/or workbooks digitally that you must pay for on the student's behalf, depending on the program. You must purchase a trainer kit for each trainer in your Center. You are not permitted to purchase these Products from any other supplier.
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, Item 9 outlines franchisee obligations, including pre-opening purchases/leases, which are further detailed in Sections 10.02 & 12.6 of the Franchise Agreement and referenced in Item 11 of the disclosure document. This indicates that franchisees are obligated to make certain purchases or enter into leases before opening their Learningrx center.
Item 8 details restrictions on sources of products and services. Learningrx requires franchisees to purchase specific marketing materials, equipment, services, supplies, and materials from approved or designated suppliers, as outlined in the Operations Manual. For agreements signed on or after January 1, 2019, Learningrx Centers must use the franchisor's designated merchant services provider for client payments. Franchisees can request approval for alternative suppliers using a "Supplier Approval Criteria and Request Form," which Learningrx will review within 30 days based on factors like vendor reputation, product quality, and credit rating. However, Learningrx retains the right to make the final determination.
Learningrx is currently the only approved supplier for Products or access through the digital Training Management System. Franchisees must purchase student and trainer kits and workbooks from Learningrx, and they are not permitted to buy these Products from any other supplier. The cost of these Products is estimated to be approximately 1.5% of the total establishment purchases and about 1% of ongoing supplies and materials expenses. For the fiscal year ended September 30, 2024, LearningRx, Inc., an affiliate, received $60,569, representing 3.8% of the total revenue of $1,571,729 from these required purchases. This demonstrates that Learningrx benefits financially from these required purchases.
These restrictions ensure quality control and uniformity across all Learningrx franchises, but they also limit the franchisee's autonomy in sourcing products and services. The franchisee is obligated to comply with Learningrx's standards and specifications, potentially impacting their costs and operational flexibility. Prospective franchisees should carefully consider these restrictions and the potential financial implications of purchasing from approved suppliers.