How may Azal Coffee use the local advertising amounts paid by a franchisee?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
ll those excess expenditures.
You must spend a minimum of 1% of Gross Sales each month for advertising in your local market. You must provide us with documentation, at the times and in the form and manner specified by us, to prove that you spent the required amount on local advertising, or in our discretion, we may require you to pay the minimum local advertising amounts to us for advertising in your local market. If we require you to pay the minimum local advertising amounts to us, we may use these amounts, in our discretion, for local advertising and promotion for you (including but not limited to Digital Advertising, flyers, promotions, mailers, etc.) or as part of joint advertising or cooperative advertising. If you fail to pay these amounts in your local market, you are required to remit the amounts to us as additional royalty. Your minimum local advertising requirement is separate from and in addition to your obligations for grand opening advertising and for contributions to the marketing fund. If we require you to pay the minimum local advertising
amounts to us, we will submit to you, on request, an annual report of the receipts and disbursements of those amounts, which may be unaudited and prepared by us.
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, franchisees must spend a minimum of 1% of gross sales each month on local advertising. However, Azal Coffee has the discretion to require franchisees to pay these local advertising amounts directly to them. If Azal Coffee exercises this option, they can then use these funds for local advertising and promotion for the franchisee. This includes various methods such as digital advertising, flyers, promotions, and mailers. Azal Coffee can also use the funds as part of joint or cooperative advertising efforts.
If a franchisee fails to meet the local advertising spending requirement, they must remit the deficit to Azal Coffee as additional royalty payments. This ensures that the required advertising investment is made, even if the franchisee does not directly manage the spending. The local advertising requirement is separate from and in addition to any obligations for grand opening advertising and contributions to the marketing fund, meaning franchisees must budget for all three.
Azal Coffee will provide an annual report of the receipts and disbursements of these local advertising amounts to the franchisee upon request. This report may be unaudited and prepared by Azal Coffee, offering some transparency into how the funds are being utilized. This system allows Azal Coffee to maintain control over local advertising efforts, ensuring brand consistency and potentially leveraging economies of scale in advertising purchases, while also holding franchisees accountable for contributing to local marketing initiatives.