Regarding an Auntie Annes co-branded franchise, does Auntie Annes have the right to communicate with the Co-Branded Franchisor about the franchisee's business, and if so, what information can be shared?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
The Advertising Contribution shall be in an amount we determine, in our sole discretion, which when combined with the Local Marketing Obligation (as specified in Section 10.1.E. (Local Marketing Obligation)) shall not exceed 5% of the Net Sales of the Franchised Business, payable each week on the Net Sales of the Franchised Business for the preceding week (or on any other basis stated in the Manuals or in our written notice to you). We will collect the Advertising Contribution from you based on the portion of the Net Sales of the Franchised Business that are attributable to products that we and the Co-Branded Franchisor mutually agree, in our and its sole discretion, to credit towards the Auntie Anne's® side of the Franchised Business. Pursuant to the Co-Branded Agreement, the Co-Branded Franchisor will collect an advertising contribution from you based on the remaining portion of the Net Sales of the Franchised Business that are attributable to products that we and the Co-Branded Franchisor mutually agree, in our and its sole discretion, to credit towards the Co-Branded Franchise's side of the Franchised Business.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
Based on the 2024 Auntie Annes Franchise Disclosure Document, the franchisor does communicate with the Co-Branded Franchisor regarding the franchisee's business, specifically concerning advertising contributions. The document states that Auntie Anne's will collect an advertising contribution from the franchisee based on the portion of net sales attributable to Auntie Anne's products, as mutually agreed upon by Auntie Anne's and the Co-Branded Franchisor. The Co-Branded Franchisor, in turn, collects an advertising contribution based on the remaining portion of net sales attributable to their products, also determined by mutual agreement. This arrangement necessitates communication and agreement between Auntie Anne's and the Co-Branded Franchisor regarding the allocation of net sales for advertising contribution purposes.
This division of advertising contributions has implications for franchisees. It means that the franchisee's advertising expenses are split and managed separately by Auntie Anne's and the Co-Branded Franchisor, based on the sales of each brand's products. The franchisee must understand how net sales are attributed to each brand, as this directly affects the amount of advertising contribution owed to each franchisor. The FDD indicates that the allocation is determined through mutual agreement between Auntie Anne's and the Co-Branded Franchisor, suggesting that the franchisee may not have direct input into this process.
Prospective franchisees should seek clarification from Auntie Anne's regarding the specific criteria used to determine the allocation of net sales between the two brands. Understanding this process is crucial for budgeting and financial planning. Additionally, franchisees should inquire about the Co-Branded Agreement to fully understand the obligations and responsibilities of all parties involved, including the Co-Branded Franchisor's role in advertising and marketing efforts. This will help ensure transparency and avoid potential disputes regarding advertising contributions and marketing strategies.