For an All States M.E.D. franchise, is the local advertising expense calculated as a fixed amount or a percentage of gross revenues, and what are the specific terms?

According to All States M.E.D.'s 2024 Franchise Disclosure Document, the local advertising expense is calculated as the greater of a fixed amount or a percentage of gross revenues. Specifically, the FDD states that a franchised outlet would incur Local Advertising expenses that are "the greater of 2% of Gross Revenues or $1,000 per month".

To illustrate this calculation, the 2024 FDD includes a financial performance representation for an affiliated company store in Miami Lakes, FL, for the year 2022. In one instance, with gross revenues of $832,521, the local advertising expense was calculated as $16,650, which is 2% of the gross revenues. In another instance, with gross revenues of $541,107, the local advertising expense was $12,000, which is the greater of 2% of gross revenues or $1,000 per month.

For a prospective All States M.E.D. franchisee, this means that the amount spent on local advertising will fluctuate depending on their gross revenues. In months with lower revenues, the franchisee will pay the fixed minimum of $1,000. As revenues increase, the advertising expense will increase proportionally, up to 2% of gross revenues. This structure ensures a baseline level of advertising while also scaling the advertising budget with the success of the business. Franchisees should factor this variable expense into their financial projections and business planning.