Is Spray Net required to disclose the criteria used to approve or reject new suppliers?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
its products, and request that you reimburse our actual costs associated with the testing/inspection.
We will notify you in writing within 30 days after we receive all necessary information and/or complete our inspection or testing to advise you if we approve or disapprove the proposed item and/or supplier. The criteria we use in approving or rejecting new suppliers is proprietary, but we may (but are not required to) make it available to you upon request. Each supplier that we approve of must comply with our usual and customary requirements regarding insurance, indemnification and non-disclosure. If we incur any costs in connection with testing a particular product or evaluating an unapproved supplier at your request, you must reimburse us for our reasonable testing costs, regardless of whether we subsequently approve the item or supplier. If we approve any supplier, we will not guarantee your performance of any supply contract with that supplier under any circumstances. We may re-inspect and/or revoke our approval of a supplier or item at any time and for any reason to protect the best interests and goodwill of our System and Proprietary Marks. The revocation of a previously approved product or alternative supplier is effective immediately when you receive written notice from us of revocation and, following receipt of our notice, you may not place any new orders for the revoked product, or with the revoked supplier.
Required Purchases and the Right to Derive Revenue
We estimate that the costs of your purchases from designated or approved suppliers, or according to our standards and specifications, may range from 90% to 95% of your total purchases in connection with the establishment of your Franchised Business, and between 35% and 45% of your ongoing expenses. We may designate sources for additional goods and services, we may receive revenue, rebates, commission or other material consideration from franchisee purchases.
We derive revenue as a result of required purchases or leases by you in accordance with specifications or standards required by us, or from suppliers approved by us. Except as noted above, there are no goods or services required in the operation of the outlet for which we or persons affiliated with us are the only approved suppliers. We currently receive rebates from suppliers amounting to approximately 2-3% of the purchase price our franchisees pay them. During the year ending December 31, 2024, we received $14,161.24 in rebates from these suppliers based on our franchisee's purchases from them.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 33–36)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, Spray Net is not required to disclose the criteria it uses to approve or reject new suppliers. While the criteria are considered proprietary, Spray Net may choose to make them available to franchisees upon request, but they are not obligated to do so. Spray Net will notify the franchisee in writing within 30 days of receiving all necessary information if the proposed supplier is approved or disapproved.
When evaluating a potential alternative supplier, Spray Net considers the quality of the product, the supplier's production and delivery capabilities, their overall business reputation, and their financial condition. Spray Net may also provide the proposed supplier with their current product specifications, provided the supplier agrees to a confidentiality and non-disclosure agreement. Spray Net also has the right to inspect the supplier's facilities and test their products, with the franchisee potentially bearing the costs of these inspections and tests.
Spray Net retains the right to re-inspect or revoke approval of a supplier or item at any time, for any reason, to protect the interests of the Spray Net system. If approval is revoked, the franchisee will receive written notice and must immediately cease placing new orders with the revoked supplier or for the revoked product. This highlights the importance of maintaining good relationships with approved suppliers and ensuring consistent quality to avoid disruptions to the Spray Net franchisee's business.