ITEM 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
You must purchase or lease certain goods and services required for the operation of your business under specifications in the Confidential Methods of Operations Manual. These specifications include standards for, among other things, performance, design, appearance, quality and safety.
You must purchase Certa Pro''s proprietary software, as well as periodic upgrades to the software from Certa Pro; you must use Certa Pro''s designated toll-free telephone answering service, Tele-Link Services, an affiliate. In addition, you may purchase directly from Certa Pro business stationery and paper goods.
In addition, you must purchase the following equipment according to our specifications: computer hardware, software and ladders. The estimated cost of this equipment represents 10% to 12% of your total purchases in connection with the establishment of your business. You must also purchase the following goods and services in accordance with our specifications: paint, uniforms, insurance coverage (including collision, fire, and extended coverage insurance on the franchisee''s premises, vehicles, equipment, and inventory, business interruption insurance, workers'' compensation insurance, and public liability and indemnity insurance), business vehicles and wraps on these vehicles, signs, certain miscellaneous business stationery and paper goods, direct mail services, yellow pages advertising and other forms of marketing services.
You may purchase any of these goods and services from any approved supplier provided that the ■ goods and services meet our specifications. We maintain a list of approved suppliers that provide these goods and services to our franchisees. From time to time, we may add or remove suppliers from our approved list. We will supply you with a list these approved suppliers upon request after you sign the Franchise Agreement and pay the initial franchise fee. In addition to our approved suppliers, we will approve a supplier if the supplier is able to provide goods or services which conform to our specifications. To obtain our approval, you or a supplier must submit a written request to our Vice President of Customer Relations Management to have that supplier''s goods or services approved by Certa Pro. The request .^.■Should contain the specifications of the product or service that the supplier will provide. We do not charge a fee for approving suppliers and will issue our approval or denial of the request within 30 days of receiving a request for approval. To offset the cost of maintaining brand consistency and compliance with standards, Certa Pro may require that approved vendors pay a licensing fee of up to five percent of franchisee sales from such approved vendors, and will require the execution of an agreement containing non-disclosure and non-competition provisions. Certa Pro will revoke the approval of a supplier if the products or services provided by the supplier fail to meet Certa Pro''s standards and specifications when used in the field. We may modify our specifications at our discretion to meet the changing needs of the Certa Pro program. Any modifications we make will generally be based on comparisons and reviews of industry standards as well as on information we collect from our existing franchisees. Certa Pro''s total revenue for the sale of these goods and services, as well commissions earned on franchisee purchases from approved suppliers, for the fiscal year ending December 31, 2007, was $1,977,540 or 7.5% of its total gross revenues of $26,475,532
Certain of our approved paint suppliers pay Certa Pro up to 4% commission on certain franchisee purchases. We will provide you with the current list of the names of these paint suppliers, upon request, after you sign the Franchise Agreement. In some cases, Certa Pro negotiates purchase arrangements with suppliers for your benefit. You may, but are not guaranteed to, receive a material benefit from Certa Pro for using any of our approved suppliers. Certa Pro''s affiliates do derive revenue from the sale of goods or services directly to Certa Pro franchisees during the fiscal year ending December 31, 2007. Certa Pro does engage the services of some of its affiliates for the benefit of its franchisees, but Certa Pro pays for such goods or services itself. None of Certa Pro''s officers has an ownership interest in any of the affiliates which do business with Certa Pro franchisees.
It is impossible to determine what percentage of the total purchases that you make in operating your Certa Pro franchise will come from purchases you make from our approved suppliers. The precise amount of the purchases you make will be determined by a number of variables which we cannot predict.
Some of the variables include the size of your business; your particular buying habits and preferences; the availability of our approved suppliers in your Territory; the ratio of residential work to commercial work you perform; the location of your business; and market conditions in general. Accordingly, we do not make any statements regarding the percentage these expenses will be in relation to your total operating expenses.
Note: This was obtained from the web on Feb. 12, 2010.
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