Can Bombs Away Franchising establish market advertising cooperatives?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Bombs Away Franchising will prepare an unaudited annual financial statement of the Marketing Fund within 120 days of the close of Bombs Away Franchising's fiscal year and will provide the financial statement to Franchisee upon request.
- 9.4 Market Cooperatives. Bombs Away Franchising may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative for the geographic area encompassing the Territory has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative. If a Market Cooperative for the geographic area encompassing the Territory is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days. Bombs Away Franchising shall not require Franchisee to be a member of more than one Market Cooperative. If Bombs Away Franchising establishes a Market Cooperative:
- (a) Governance. Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Bombs Away Franchising. Bombs Away Franchising may require the Market Cooperative to adopt bylaws or regulations prepared by Bombs Away Franchising. Unless otherwise specified by Bombs Away Franchising, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. Bombs Away Franchising will be entitled to attend and participate in any meeting of a Market Cooperative. Any Bombs Away business owned by Bombs Away Franchising in the
Market Cooperative shall have the same voting rights as those owned by its franchisees. Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement. If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, Bombs Away Franchising may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose. Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to Bombs Away Franchising's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval. No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Bombs Away Franchising pursuant to Section 9.1. Bombs Away Franchising may designate the national or regional advertising agencies used by the Market Cooperative.
- (d) Funding. The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% and not more than 5% of Gross Sales.
- (e) Enforcement. Only Bombs Away Franchising will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
- (f) Termination. Bombs Away Franchising may terminate any Market Cooperative. Any funds left in a Market Cooperative upon termination will be transferred to the Marketing Fund.
- 9.5 Required Spending. Franchisee shall spend at least 5% of Gross Sales each month on marketing the Business. Upon request of Bombs Away Franchising, Franchisee shall furnish proof of its compliance with this Section. Bombs Away Franchising has the sole discretion to determine what activities constitute "marketing" under this Section. Bombs Away Franchising may, in its discretion, determine that if Franchisee contributes to a Market Cooperative, the amount of the contribution will be counted towards Franchisee's required spending under this Section.
- 9.6 Market Introduction Plan. Franchisee must develop a market introduction plan and obtain Bombs Away Franchising's approval of the market introduction plan at least 30 days before the projected opening date of the Business.
**ARTICLE 10.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Bombs Away Franchising has the option to establish market advertising and promotional cooperative funds, referred to as "Market Cooperative," in any geographical area. If a Market Cooperative exists in the franchisee's territory when they start operations, they must immediately join. If a Market Cooperative is created during the franchise agreement, the franchisee must join within 30 days. Bombs Away Franchising will not require a franchisee to be a member of more than one Market Cooperative.
Bombs Away Franchising determines the organization, governance, and start date of each Market Cooperative and may require the adoption of bylaws or regulations it prepares. Unless Bombs Away Franchising specifies otherwise, a majority vote of the members decides the activities of each Market Cooperative. Bombs Away Franchising can attend and participate in any Market Cooperative meeting and has the same voting rights as franchisees for any Bombs Away business it owns within the cooperative. Each business owner gets one vote per business, but a franchisee in default under their agreement cannot vote. If the members can't decide how to spend the Market Cooperative's money, Bombs Away Franchising can take over the decision-making after giving 10 days' notice.
Each Market Cooperative focuses on regional advertising and marketing programs and develops standardized promotional materials for members' local advertising, subject to Bombs Away Franchising's approval. No advertising or promotional plans can be used without Bombs Away Franchising's prior approval, and Bombs Away Franchising may designate the advertising agencies used by the Market Cooperative. The members of the Market Cooperative, including the franchisee, determine the dues to be paid, which must be between 1% and 5% of Gross Sales. Bombs Away Franchising alone can enforce the obligations of franchisees to contribute to the Market Cooperative. Bombs Away Franchising can also terminate any Market Cooperative, and any remaining funds will be transferred to the Marketing Fund.
The franchisee is required to spend at least 5% of Gross Sales each month on marketing the Business, and must provide proof of compliance upon request. Bombs Away Franchising has the discretion to decide what counts as "marketing" and may count contributions to a Market Cooperative towards this required spending. Franchisees must also develop a market introduction plan and get it approved by Bombs Away Franchising at least 30 days before opening their Business.