What are some examples of expenses that can be paid from the Burros Fries System Advertising Fund?

Agreement Sections 12.I and 20.A).

• (10) Reserve the right at our discretion to institute, maintain, and administer a System Advertising Fund (referred to as the "Fund") to support ongoing technology and new product development to be made available to Franchisees, and such national advertising as we, in our sole discretion, may deem appropriate to promote the System to benefit all franchised businesses as described in Item 6. We will direct all such programs and will have sole discretion over the creative concepts, materials and endorsements and media used in such programs, and the placement or allocation of such programs. The source of the advertising will come from our in-office advertising department, or may in the future from a national or local advertising agency. We reserve the right to determine in our sole discretion the composition of all geographic territories and market areas for the implementation and development of such programs (Franchise Agreement, Section 10.B).
  • (i.) You will pay us one to three percent (1%-3%) of Gross Revenues per calendar month for the System Advertising contribution, paid to us, as designated in the Franchise Agreement. We may raise, discontinue or reduce the contribution but the increase will not exceed 1% per year upon 90 days' written notice to you and shall not exceed 3% of Gross Revenue per month but your total contribution will not exceed three percent (3%) of your Gross Revenue in any calendar year for the term of the Agreement. You will begin at one percent (1%) per year if and when the program is established. Contributions are due by the fifth (5th) day of the month (for the prior month) which will start immediately once your Business is open for operation then continues for the term of your Franchise (as described in Item 6). Refer to Item 6 for definition of Gross Revenue.
  • (ii.) The contributions will be accounted for separately from our other funds and will not be used to defray any of our general operating expenses, except for such reasonable salaries, administrative costs, travel expenses and overhead as we may incur in activities related to the administration of the Fund and its programs, including conducting evaluation of new products, new menu or retail items, kitchen equipment and technologies; product development, market research, preparing advertising, promotion and marketing materials, and collecting and accounting for contributions to the Fund. Usage of the Fund will include ongoing development of the national website and development of new products to be made available to franchisees. The media in which advertisements may be disseminated include print ads, signs, billboards, and radio and may be conducted on a regional or national basis. We may spend, on behalf of the Fund, in any fiscal year an amount greater or less than the aggregate contribution of all franchises in that year, and the Fund may borrow from us or others to cover deficits or invest any surplus for future use.
  • (iii.) In the future, we may form a franchisee-elected Franchisee Advisory Council or cooperative whose sole purpose is to advise on System Advertising Fund usage and advertising policies. We retain all operational and decision-making authority concerning advertising and the Advisory Council will serve only in an advisory capacity. The membership of any Franchise Advisory Council will be national in scope. The Advisory Council will not be separately

• incorporated, and therefore, it will not have any written documents. If one is formed, we will have the power to select and approve the members and to form, change, dissolve or merge the Advertising Council as described below.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–38)