What are the potential risks of Cooperative membership for Burneys Sweets More franchisees?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
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The following provisions shall apply to each Cooperative:
(i) Each Cooperative shall be organized and governed in a form and manner, and shall commence operation on a date, approved in advance by Franchisor in writing.
(ii) Each Cooperative shall be organized for the purposes of producing and conducting general advertising programs and activities for use in and around the applicable geographic area and developing standardized promotional materials for use by the members.
(iii) No advertising programs or materials may be used by the Cooperative or furnished to its members, and no advertising or promotional activities may be conducted by the Cooperative, without the prior written approval of Franchisor. All such programs, materials and planned activities shall be submitted to Franchisor for approval in accordance with the procedure set forth in Section 8(f).
(iv) Members of the Cooperative shall make contributions to the Cooperative in such amounts as are determined by the governing body of the Cooperative. Each member of the Cooperative shall make contributions to the Cooperative on the same basis as the other members, whether owned by Franchisee, another franchisee, Franchisor, or Franchisor's affiliates. In no event shall members be required to contribute more than Four Percent (4%) of monthly Gross Sales.
(v) Franchisee shall make its contributions to the Cooperative on the date and in the manner designated by the Cooperative. Franchisee shall also submit such statements and reports as may be designated from time to time by the Cooperative. The Cooperative shall submit to Franchisor such statements and reports as Franchisor may designate from time to time. The Cooperative shall prepare written governing documents that shall be available to Franchisee and Franchisor for review. These written governing documents are subject to Franchisor's approval. The Cooperative is responsible for determining its own voting procedures; however, each BURNEY'S SWEETS & MORE franchised business that is a member of the Cooperative is entitled to one vote. The Cooperative must prepare quarterly and annual financial statements and these statements must be made available to all members in the Cooperative. The members of the Cooperative and their governing body are responsible for administering the Cooperative.
(vi) Notwithstanding the foregoing to the contrary, Franchisor, in its sole discretion, may grant to any BURNEY'S SWEETS & MORE franchised business an exemption from the requirement of membership in a Cooperative. Such an exemption may be for any length of time and may apply to one (1) or more businesses owned by the exempted party.
(vii) The Cooperative is not a trust fund. Franchisor and its affiliates shall have no fiduciary duty to Franchisee in connection with the collection or use of the Cooperative monies or any aspect of the operation of any Cooperative.
(d) Supplemental Advertising.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to the 2025 Burneys Sweets More FDD, franchisees are required to contribute to a Cooperative, which is used for advertising programs and activities in the franchisee's geographic area. While the Cooperative aims to benefit all members, there are potential risks. Franchisees must contribute to the Cooperative based on terms set by its governing body, up to a maximum of 4% of monthly Gross Sales. This mandatory contribution represents a financial obligation for the franchisee, regardless of the Cooperative's success or the franchisee's individual advertising needs. Franchisees are required to make contributions as determined by the cooperative's governing body.
A key risk lies in the fact that Burneys Sweets More franchisees have limited control over how the Cooperative spends its funds. Although the Cooperative must provide quarterly and annual financial statements to its members, the members of the Cooperative and their governing body are responsible for administering the Cooperative. The advertising programs and materials used by the Cooperative require prior written approval from Burneys Sweets More, but the franchisees themselves may have limited input into the selection and execution of these programs. This could result in funds being spent on advertising that the franchisee does not believe is effective or targeted to their specific customer base.
Furthermore, Burneys Sweets More retains the right to grant exemptions from Cooperative membership to any franchisee. This could create an uneven playing field, where some franchisees benefit from Cooperative advertising while others do not, potentially impacting the competitive landscape within the Burneys Sweets More system. The FDD states that the Cooperative is not a trust fund, and Burneys Sweets More and its affiliates have no fiduciary duty to the franchisee regarding the collection or use of Cooperative monies. This means that franchisees have limited recourse if they believe the Cooperative is being mismanaged or that funds are not being used effectively.
In summary, while Cooperative membership is intended to support advertising and promotion for Burneys Sweets More franchisees, it also carries risks related to mandatory contributions, limited control over spending, potential exemptions for other franchisees, and the absence of a fiduciary duty from Burneys Sweets More regarding Cooperative funds. Prospective franchisees should carefully consider these factors and seek clarification from Burneys Sweets More regarding the operation and governance of the Cooperative before investing in a franchise.