What is the relationship between the Auntie Annes Advertising Contribution and the Local Marketing Obligation?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
ot obligated to conduct any advertising. We may periodically formulate, develop, produce, and conduct, at our sole discretion, advertising or promotional programs in such forms and media as we determine to be most effective. We may make available to you for you to purchase approved advertising and promotional materials, including signs, posters, collaterals, etc. that we have prepared.
Ad Fund. We will allocate your Advertising Contributions to a fund for the advertising and promotion of the Shops, the Proprietary Marks, and the System (the "Ad Fund"). Currently, you must make a monthly Advertising Contribution to the Ad Fund in the amount of 1.5% of Net Sales for Shops located in Other Locations and 3% of Net Sales for Shops located in Streetside
Locations. We may increase the Advertising Contribution by notice to franchisees. However, your required Advertising Contribution and Local Marketing Obligation will collectively not exceed 5% of your Net Sales. Your Advertising Contribution is in addition to your Local Marketing Obligation and your Grand Opening Obligation (as defined below).
We currently do not, and are not required to, maintain the Ad Fund, Advertising Contribution you paid, or income earned from contributions to the Ad Fund in a separate account from our other money. Our Shops will contribute to the Ad Fund in the same manner and in the same amounts as similarly-situated franchised Shops. Our other franchisees may not be required to contribute to the Ad Fund, may be required to contribute to the Ad Fund at a different rate than you, or may be required to contribute to a different advertising fund.
We or an affiliate will administer the Ad Fund. We have sole authority to direct all advertising programs and promotions and uses of the Ad Fund, with sole control over the creative concepts, materials, and media used in the programs, and the placement and allocation of advertising. We reserve the right to use any media, create any programs, and allocate advertising and promotional expenditures to any regions or locales we deem appropriate.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 61–77)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, franchisees are required to contribute to both an Advertising Fund and fulfill a Local Marketing Obligation. The Advertising Contribution is a percentage of Net Sales, set at 1.5% for Shops in Other Locations and 3% for Streetside Locations. This contribution is allocated to the Ad Fund, which Auntie Annes manages for advertising and promotion of the Shops, Proprietary Marks, and the System. The Local Marketing Obligation requires franchisees to spend a minimum amount on local market advertising, with expenditures needing to comply with Auntie Anne's requirements to count toward the obligation. Both the Advertising Contribution and the Local Marketing Obligation are in addition to the Grand Opening Obligation. The combined Advertising Contribution and Local Marketing Obligation cannot exceed 5% of Net Sales.
Auntie Annes retains the right to collect all or part of the Local Marketing Obligation from franchisees. If Auntie Annes exercises this right and collects the entire Local Marketing Obligation, the franchisee is then not required to spend a minimum amount on local advertising (excluding the Grand Opening Obligation), provide a local marketing plan, or participate in an Advertising Cooperative. The funds collected from the Local Marketing Obligation can be used by Auntie Annes to contribute to the Ad Fund, spend on national, regional, or local advertising campaigns, contribute to the franchisee's Advertising Cooperative, or spend on local advertising in the franchisee's market.
Amounts that franchisees contribute to an advertising cooperative will be credited toward their Local Marketing Obligation. These contributions to the Advertising Cooperative are in addition to the Advertising Contribution and Grand Opening Obligation. Auntie Annes may require Advertising Cooperatives to use only approved public relations firms and advertising agencies. All advertising and promotional materials from Advertising Cooperatives must receive written approval from Auntie Annes before use. Auntie Annes also has the authority to suspend or terminate an Advertising Cooperative's program or operations with 30 days' written notice.