How does Amerispec Inspection Services recognize sales-based royalties, admin fees, and advertising fees?

y a monthly "Advertising Contribution" of up to 3% of the Gross Receipts of the Franchised Business in the immediately preceding month, subject to a minimum contribution of $160 per month. These fees will commence at the same time as the Royalties described in Paragraph 5.1 and will be transmitted to the Company at the same time and in the same manner as is required of the Royalties.

• 6.2 Advertising Fund. Reasonable disbursements from the Advertising Fund shall be made solely for the payment of expenses incurred in connection with the general promotion of the Names and Marks and the AmeriSpec franchise system, including, but not limited to: (i) the cost of formulating, developing and implementing media advertising and public relations campaigns; (ii) the cost of formulating, developing and implementing promotional programs; (iii) the cost of monitoring and/or managing social media relating to the brand, (iv) at the option of the Company, reimbursement of all or part of each Franchisee's cost of purchasing promotional materials used in connection with promotional programs authorized by the Company; and (v) the reasonable cost of administering the Advertising Fund, including accounting expenses and the actual cost of salaries and fringe benefits paid to the Company's employees engaged in administration of the Advertising Fund. There shall be no requirement that all or any part of the Advertising Fund be disbursed within any accounting period. Losses sustained, or gains accrued, in the Advertising Fund shall carry over to subsequent fiscal years. All interest if any earned by the Advertising Fund shall be used for the payment of the foregoing expenses in connection with promotion of the Names and Marks, before application of any principal to those expenses. Methods of advertising, selection of media, locale of advertising, and contents, terms and conditions of advertising campaigns and promotional programs shall be within the sole discretion of the Company. The Franchisee understands that such advertising is intended to maximize the public's awareness of the AmeriSpec franchise system. Accordingly, the Company undertakes no obligation to ensure that any individual franchisee benefits directly or on a pro rata basis from the placement, if any, of such advertising in its local market. If requested by the Franchisee, the Company shall provide the Franchisee an annual statement of the financial condition of the Advertising Fund, certified by an executive officer of the Company.
• 6.3 Disbursements. Disbursements from the Advertising Fund shall not be made for the payment of expenses incurred in connection with the Company's direct marketing of franchise licenses.

Notwithstanding the foregoing, a brief statement regarding the availability of AmeriSpec franchises may be included in advertising and other items produced using the Advertising Fund.

• 6.4 Local Advertising. At its own expense, the Franchisee may conduct advertising campaigns and promotional programs designed primarily to promote the Franchised Business ("Local Advertising"). Prior to implementing any Local Advertising, the Franchisee shall submit to the Company for approval all advertising and promotional material proposed to be used in connection with the Local Advertising. The Company has the right to also review and approve internal advertising efforts, such as web sites and electronic mail (e-mail). The Company may, at its discretion, provide to Franchisee standards to which such internet advertising efforts must conform.
• 6.5 Marketing and Technology Bundle. In addition to the Initial Franchise Fee, Franchisee must purchase from the Company an opening package of marketing and technology items (the "Marketing and Technology Bundle"), which includes (i) computer equipment, including a laptop, (ii) the initial license fee for the AmeriSpec Inspection Software, which is the in-field software (the "AIS"), (iii) the initial license fee for the AmeriSpec Management System, which is an online business management tool (the "AMS"), (iv) a marketing bundle that includes an initial order of stationery supplies, business cards, and other startup marketing materials, and (v) the admission fee for one attendee to attend Franchisee's first franchisee convention. The Marketing and Technology Bundle currently costs $3,900.

Source: Item 23 — Receipts (FDD pages 47–172)