Does Benihana treat Advertising Contributions as trust funds dedicated exclusively for advertising or promotion?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee acknowledges and agrees that the Advertising Contributions paid by Franchisee under this Agreement may be co-mingled with BNC's general funds and nothing in this Agreement shall be interpreted to mean that receipt by BNC of any Advertising Contributions constitutes a trust fund or any other fund dedicated exclusively for advertising or promotion.
Without creating any specific obligations on BNC to apply Advertising Contributions in any specific manner other than in BNC's sole and absolute discretion, BNC intends as a general matter to use Advertising Contributions for expenses related to brand advertising, in-store, local, national or regional advertising placed by BNC, or public relations.
BNC undertakes no obligation to make expenditures for Franchisee that are equivalent or proportionate to Advertising Contributions Franchisee pays under this Agreement or to insure that Franchisee benefits directly or on a pro rata basis from BNC's use of Advertising Contributions.
- 9.3 In addition to the Advertising Contributions to be paid to BNC under Section 7.3 of this Agreement, Franchisee must spend in each of Franchisee's fiscal years an amount ("Local Spend") that is not less than two percent (2%) of Gross Sales in that fiscal year for local print, radio, digital, and television and/or billboard display advertising and local marketing and promotion ("Local Advertising").
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, advertising contributions paid by franchisees are not treated as trust funds dedicated exclusively for advertising or promotion. Benihana may co-mingle these contributions with its general funds. This means that the advertising fees you pay are not necessarily set aside in a separate account solely for advertising purposes.
Benihana has the discretion to use advertising contributions for expenses related to brand advertising, including in-store, local, national, or regional advertising, as well as public relations. However, Benihana does not guarantee that expenditures will be equivalent or proportionate to the contributions a franchisee pays, nor does it ensure that a franchisee will directly benefit on a pro rata basis from the use of these advertising contributions.
In addition to the advertising contributions, franchisees must also spend a minimum of 2% of their gross sales each fiscal year on local advertising. This local spend covers print, radio, digital, television, and billboard advertising, as well as local marketing and promotion. All local advertising materials must be approved in advance by Benihana, ensuring they conform to the brand's standards. This local advertising requirement gives the franchisee some control over marketing efforts in their specific location, but it also adds to the overall marketing expenses.