What is Baya Bar's obligation regarding the administration of the marketing fund?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
System franchisees. All franchisees will contribute the same percentage to the Fund.
The Marketing Fund is administered by our owner William Loesch. We may use Marketing Fund contributions to pay any and all costs for developing, producing and disseminating advertising, marketing, promotional and public relations materials, programs, campaigns, sales and marketing seminars and training programs of every kind and nature, through any media we determine; conducting marketing research and employing advertising agencies; developing, enhancing and maintaining our website, social media platforms, apps, and other technology for the benefit of the Marketing Fund image and/or Systemwide
improvements; and staff salaries and other personnel and departmental costs for advertising that we internally administer or prepare.
The Marketing Fund will not be used to defray any of our other general operating expenses. Marketing Fund contributions will not be used to solicit new franchise sales; provided however, we have the right to use the Marketing Fund for public relations, to explain the franchise system, and/or include "Franchises Available" or similar language and contact information in advertising produced with Marketing Fund contributions.
The Marketing Fund collects and expends contributions for the benefit of the System as a whole. We have the right to use the Marketing Fund contributions to place advertising in national, regional or local media (including broadcast, print, or other media) and to conduct marketing campaigns through any channel, in our discretion, including but not limited to, internet and direct-mail campaigns. We have no obligation, however, to use the Brand Fund to place advertising or conduct marketing campaigns in any particular area, including the geographical area where your Franchised Business is located. No amount of the Fund will be spent for advertising that is principally a solicitation for the sale of franchises.
We have no obligation to make expenditures that are equivalent or proportionate to your Marketing Fund contribution or to ensure that you benefit directly or pro rata from the production or placement of advertising from the Brand Fund.
We have the right to reimburse ourselves out of the Fund for the total costs (including indirect costs such as salaries for our employees who devote time and effort to Fund related activities and overhead expenses) of developing, producing and distributing any advertising materials and collecting the marketing fund fee (including attorneys', auditors' and accountants' fees and other expenses incurred in connection with collecting any marketing fund fee). We also have the right to use a portion of the Fund to subsidize the cost of presenting refresher training and/or a franchisee meeting. The Marketing Fund and its earnings shall not otherwise inure to our benefit except that any resulting technology and intellectual property shall be deemed our property."
Shops owned by us or our affiliates are not obligated to contribute to the Fund. Funds from the marketing fund fees paid will be kept in a non-interest-bearing account separate from our other funds. These funds will not be used to defray any of our general operating expenses, except as described in the paragraph above. Any sums paid to the Fund that are not spent in the year they are collected will carry over to the following year. We will prepare, and furnish to you upon written request, an annual statement of funds collected, and costs incurred. We are not required to have any Fund statement audited, but if we choose to have the Fund audited it will be at the Fund's expense.
In our most recently concluded fiscal year ending December 31, 2023, Marketing Fund contributions, including contributions that were carried over from the previous year, were used as follows: 17% for production, 76% for media placement, and 7% for administrative expenses.
Although the Fund is intended to be perpetual, we may terminate the Fund at any time. The Fund will not be terminated until all monies in the Fund have been spent for advertising or promotional purposes or returned to contributors on a pro rata basis. If we terminate the Fund, we have the right to reinstate it at any time and you must again contribute to the Fund. Any reinstated Fund will be maintained as described above.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 26–36)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, the marketing fund is administered by Baya Bar's owner, William Loesch. Franchisees are required to contribute 1% of their gross sales weekly to the fund. Baya Bar may use these contributions to cover costs associated with advertising, marketing, promotional materials, public relations, sales and marketing seminars, training programs, marketing research, advertising agencies, website and social media maintenance, technology improvements, and staff salaries related to advertising.
The funds are to be kept in a non-interest-bearing account separate from Baya Bar's other funds and will not be used for general operating expenses, except as described above. Any unspent funds at the end of the year will be carried over to the following year. Upon written request, Baya Bar will provide franchisees with an annual statement of funds collected and costs incurred. While an audit of the fund statement is not required, Baya Bar may choose to have one at the fund's expense.
Baya Bar has the right to use the marketing fund contributions for advertising in national, regional, or local media and to conduct marketing campaigns through any channel. However, Baya Bar is not obligated to place advertising or conduct marketing campaigns in any specific area, including the franchisee's location. The marketing fund will not be used to solicit new franchise sales, although it can be used for public relations to explain the franchise system and include "Franchises Available" language in advertising.
Baya Bar is not obligated to make expenditures equivalent to a franchisee's contribution or ensure direct benefits from advertising. They can reimburse themselves from the fund for costs related to developing and distributing advertising materials and collecting the marketing fund fee, including salaries and overhead. The fund can also subsidize refresher training or franchisee meetings. Although the fund is intended to be perpetual, Baya Bar may terminate it at any time, provided all monies are spent on advertising or returned to contributors pro rata. Baya Bar can reinstate the fund at any time, requiring franchisees to contribute again.