What are the potential consequences if an Auntie Annes franchisee fails to make advertising expenditures in accordance with Section 10.1.C regarding the Grand Opening Obligation?

According to Auntie Annes's 2024 Franchise Disclosure Document, if a franchisee fails to meet the grand opening advertising expenditure requirements outlined in Section 10.1.C, Auntie Annes has specific rights. The franchisee is obligated to spend a minimum amount on grand opening advertising to promote their new business within a set timeframe, as detailed in Schedule A. This expenditure is separate from the standard advertising contributions and any local advertising requirements.

Should a franchisee fail to adhere to Section 10.1.C, Auntie Annes retains the right to take corrective action. Specifically, Auntie Annes can either require the franchisee to allocate the remaining unspent amount towards local marketing advertising, which would be in addition to their regular Local Marketing Obligation, or Auntie Annes can directly manage the remaining grand opening advertising.

If Auntie Annes chooses to manage the advertising, they can spend up to the amount of the franchisee's Grand Opening Obligation to promote the opening of the franchise. In this scenario, the franchisee is then obligated to reimburse Auntie Annes for all expenses incurred during this advertising effort. This ensures that the grand opening is properly promoted, even if the franchisee initially fails to meet their advertising obligations.