Does Azal Coffee have the right to require periodic contributions to a marketing fund?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
We currently collect 1% of Gross Sales and reserve the right to require that you make periodic contributions to a marketing fund in an amount of up to 3% of your Gross Sales. We are not obligated to implement a marketing fund or to continue the marketing fund, if implemented, and may change the amount or suspend contributions to or operations of the marketing fund or terminate the marketing fund (or reinstate the marketing fund if it is terminated). We intend that all Azal Coffee franchises will contribute to the marketing fund at the same rate. We further intend that our corporate and affiliate owned Stores will contribute to the marketing fund on the same basis as franchisees.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 27–36)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Azal Coffee has the right to require franchisees to make periodic contributions to a marketing fund. Currently, Azal Coffee collects 1% of Gross Sales but reserves the right to require up to 3% of Gross Sales for the marketing fund.
However, Azal Coffee is not obligated to implement or continue the marketing fund. They can change the amount, suspend contributions, or terminate the fund. The FDD states that Azal Coffee intends for all franchise locations, including corporate and affiliate-owned stores, to contribute to the marketing fund at the same rate.
The marketing fund will be used to increase recognition of the Azal Coffee brand, develop marketing materials, conduct advertising programs, provide marketing support, maintain franchise technology, obtain public relations services, and cover the expenses of administering the fund. Azal Coffee will provide an annual report of the marketing fund's receipts and disbursements upon request. The funds are intended to be spent during the fiscal year in which they are contributed, with consideration for reserves and other business needs.
In 2023, Azal Coffee did not collect marketing fund payments from franchisees. In addition to the marketing fund, franchisees may also be required to participate in local, regional, or national advertising programs and advertising cooperatives, potentially increasing their overall advertising expenses. Franchisees are also obligated to spend a minimum of 1% of Gross Sales each month for advertising in their local market.