How does Big O Tires account for franchisees' contributions to national advertising funds?

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• 15.02 National Marketing Program. Big O has established a National Marketing Program which Big O, in its sole discretion, may decide to terminate or suspend at any time. If Big O does terminate or suspend the National Marketing Program, Big O, in its sole discretion, may re-establish it at any time. Big O shall notify Franchisee as to the manner in which it shall function and the amount of contribution required of Franchisee.
  • (a) Not later than the Due Date, Big O or its designee must have received from Franchisee such amount as Big O shall designate, but not more than one percent (1%) of its previous month's Gross Sales (the "NMP Percentage Fee") plus such amount per month charged per franchisee to the Big O marketing fund by a third party who administers the National Auto Service Warranty for Big O, as a contribution to the National Marketing Program which shall be maintained or approved by Big O for Big O system-wide Advertising efforts. Big O shall limit any increase in Franchisee's NMP Percentage Fee from any amount then currently being charged to one-tenth of one percent (0.1%) in any twelve (12) consecutive month period and an additional one-tenth of one percent (0.1%) for each twelve (12) consecutive months thereafter until the one percent (1%) limitation is reached. Such incremental increases shall not be cumulative so that if Big O fails to adopt an additional incremental increase after any twelve (12) consecutive month period, the next one-tenth of one percent (0.1%) incremental increase will not accrue until actually adopted by Big O and shall constitute the maximum for the next consecutive twelve (12) months; provided, however, in the event Big O shall determine, in its sole judgment and discretion, that a special Advertising circumstance or opportunity is available to Big O and/or its franchisees, Big O may propose to the Franchise Advisory Council a greater increase during any consecutive twelve (12) month period

(up to one percent (1%) limit), and if a majority of the members of the Franchise Advisory Council agree to such increase, it shall be implemented by Big O, notwithstanding Big O's limitation as to the phasing in of any increases.

• (b) Big O shall, following consultation with the Franchise Advisory Council, direct all systemwide Advertising efforts which are provided through the National Marketing Program with Big O retaining sole discretion over the concepts, materials, and media used therein. All National Marketing Program contributions paid by Franchisee and other similarly situated Big O System franchisees to Big O shall be part of the National Marketing Program.
• (c) In particular, the National Marketing Program may be used for production of commercial print, radio, television, or internet advertising, direct response literature, brochures, collateral material advertising, surveys of advertising effectiveness, fees or expenses for any advertising agency, other advertising or public relations expenditures and general efforts to promote the Big O brand and system, such as web site development, digital marketing, digital advertising, customer relationship management, call management, social media, store rating programs, research, retail selling system development and administration of the National Auto Service Warranty. Franchisee understands and acknowledges that the National Marketing Program is intended to maximize general public recognition and acceptance of the Licensed Marks and for other benefits for the System and that Big O undertakes no obligation in administering the National Marketing Program to insure that any particular franchisee benefits directly or pro rata from the national Advertising. Franchisee agrees that the National Marketing Program may be used to meet any and all costs incident to such Advertising; provided that no part thereof shall be used by Big O to defray its general operating expenses other than (i) those reasonably allocable to such Advertising, or (ii) other activities reasonably related to the administration or direction of the National Marketing Program and its related programs. At Big O's discretion, from time to time, Big O may advance funds to the National Marketing Program to cover expenditures of the National Marketing Program. At Big O's election, it may recover any funds so advanced from future franchisee contributions and Big O may adjust future expenditures as may be necessary to make funds available for its recovery.
• (d) Any part of the National Marketing Program contributions paid to Big O, but not spent by Big O during Big O's fiscal year, which Big O may change in its sole discretion, shall remain in the National Marketing Program. Any taxes imposed on the National Marketing Program shall be paid from the National Marketing Program. No refund of contributions to the National Marketing Program shall be due Franchisee upon termination or nonrenewal of this Agreement.
• (e) The Franchise Advisory Council shall have the right to review all expenditures of the National Marketing Program on a regular basis.

15.03 Local Fund.

(a) Franchisee shall also contribute by the Due Date a minimum of four percent (4%) of its Store's Gross Sales for the previous month to Big O or as directed by Big O; provided, however, that such contributions may be reduced periodically at times, in circumstances and on conditions set forth in policies adopted by Big O from time to time in its sole discretion.

Source: Item 23 — RECEIPTS (FDD pages 102–535)