Franchise Revenues

12 Months Ended

Dec. 31, 2013

Note 11

- FRANCHISE REVENUES

The Company enters into franchise agreements to develop retail outlets for the Company's products. These agreements provide that franchisees will sell Company products exclusively at a predetermined retail price. In exchange, the Company provides them with geographic exclusivity, discounted products, training, and support. The agreements also require franchisees to adhere to certain standards of product merchandising, promotion, and presentment. The agreements also prohibit franchisees from selling competitors’ products. The agreements do not require any initial franchise fees from the franchisees, nor do they require the franchisees to pay continuing royalties. The agreements do not require the franchisees to purchase any minimum levels of product, but do require that they make at least one purchase during each year. The Company does not manage the franchisees’ levels of product. Franchisees hold periodic conferences, assisted by the Company’s marketing department, to promote product awareness and introduce new products. The franchising agreements are generally for terms of three years and are renewable at the mutual agreement of both parties. The franchising agreements are cancelable at the Company’s discretion if franchisees violate the terms of the agreements.

The following is a breakdown of revenue between franchise and non-franchise customers:

	Year ended December 31,
	2013			2012

Sales to franchise customers	$	1,281,106		$	1,751,863
Sales to non-franchise customers		110,239			146,043

Total sales	$	1,391,345		$	1,897,906

Change in franchise outlets:
Number of franchise outlets open at beginning of the year		193			247
Number of franchise outlets opened during the year		27			14
Number of franchise outlets closed during the year		(44	)		(68	)

Number of franchise outlets open at the end of the year		176			193