ITEM 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
You must purchase your pipe bending machine, hoist, cutting torch, mufflers, exhaust pipe, and other supplies under specifications in the operations manual. These specifications include standards for delivery, performance, design, and appearance. Our specifications are formulated by our engineering department and may be modified periodically, in consultation with the Belmont Franchisee Advisory Council.
Required and approved suppliers
You must purchase required equipment from Belmont or an approved supplier. Belmont’s affiliate, Belmont Muffler Manufacturers, Inc., is an approved supplier of mufflers. Our President, Jane Doe, owns an interest in Belmont Muffler Manufacturers, Inc. W e have also approved three other suppliers of mufflers and exhaust pipe, as listed in our operations manual.
Approval of alternative suppliers
Belmont may approve other suppliers of mufflers and exhaust pipe who meet the specifications set forth in the operations manual. If you would like to purchase these items from another supplier, you must request our “Supplier Approval Criteria and Request Form.” Based on the information and samples you supply to us and your payment of a $500 fee, we will test the items supplied and review the proposed supplier’s financial records, business reputation, delivery performance, credit rating, and other information. Our review typically is completed in 30 days. Approval of alternative suppliers may be revoked if our engineering department determines that their mufflers and exhaust pipe fail to satisfy the specifications set forth in the operations manual, as it may periodically be updated.
Revenue from franchisee purchases
In the year ending December 31, 2007, Belmont’s revenues from the sale of equipment to franchisees was $500,000, or 5% of Belmont’s total revenues of $10,000,000. The cost of equipment and supplies purchased in accordance with our specifications will represent 50-60% of your total purchases in establishing the business and 20-30% of your total purchases during operation of the business. In the year ending December 31, 2007, Belmont Muffler Manufacturer’s Inc.’s revenues from the sale of mufflers to franchisees was $2,000,000. The purchase of mufflers from Belmont Muffler Manufacturers will represent 10 to 15% of your overall purchases in establishing and operating the business. Belmont Muffler Manufacturers, Inc., pays us a .05% rebate on all mufflers purchased from franchisees.
One of the three approved suppliers of mufflers and exhaust pipe pays Belmont a rebate of 1% of all franchisee purchases.
We do not have any purchasing or distribution cooperatives.
We negotiate purchase arrangements with Belmont Muffler Manufacturers, Inc., including the price terms.
We do not provide any material benefits to you if you buy from sources we approve.