Does a franchisee advertising council advise CJR on advertising policy for Carls franchises?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
During the term of the Franchise Agreement, you will have an advertising and promotion obligation ("APO"), paid on a weekly basis, in the amount set forth in an appendix to the Franchise Agreement. You will pay that portion of the APO as we direct to the Production Fund described in the next paragraph. The remainder of the APO shall be paid, at the same time and in the same manner as the royalty fee, to a Media Fund. Currently, 1.0% of Gross Sales is paid to the Production Fund and 5% of Gross Sales is paid to the Media Fund. HR reserves the right to reallocate or change the APO split. There is no franchisee advertising council that advises CJR on advertising policy.
Our predecessor has established, and we will maintain and administer, a fund for the creation and development of advertising, marketing and public relations, research and related programs, gift card and loyalty programs, activities and materials that we, in our sole discretion, deem appropriate ("Production Fund"). Vendors and suppliers also may contribute to the Production Fund. We or our designee direct all advertising, marketing, and public relations programs and activities financed by the Production Fund with sole discretion over the creative concepts, materials and endorsements used in those programs and activities, and the geographic, market and media placement and allocation of advertising and marketing materials. We usually work with an advertising agency in developing advertising for print, radio, Internet and television and leverage internal and contract creative services.
Our predecessor also has established, and we will maintain and administer, a fund for all working media costs ("Media Fund"). We or our designee direct all advertising, marketing, and public relations programs and activities financed by the Media Fund with sole discretion over the creative concepts, materials and endorsements used in those programs and activities, and the geographic, market and media placement and allocation of advertising and marketing materials.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 41–54)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, there is no franchisee advertising council that advises CJR on advertising policy. Franchisees are obligated to contribute to an advertising and promotion obligation (APO), which is paid weekly. A portion of this APO is directed to a Production Fund, and the remainder is paid to a Media Fund. Currently, 1.0% of Gross Sales is allocated to the Production Fund, while 5% of Gross Sales is allocated to the Media Fund. However, HR reserves the right to reallocate or change the APO split.
Carls maintains and administers both the Production Fund and the Media Fund, which are used for advertising, marketing, public relations, research, gift card and loyalty programs, and related activities. Carls has sole discretion over the creative concepts, materials, endorsements, and the placement and allocation of advertising and marketing materials. They typically collaborate with an advertising agency for developing advertising content across various media channels, including print, radio, internet, and television.
Franchisees can purchase local advertising and promotion materials from CJR-approved sources. If franchisees choose to purchase these materials from other sources, they must ensure compliance with all applicable laws and regulations and adhere to CJR's advertising guidelines. These materials must be submitted to CJR for approval at least 30 days before their intended use, and CJR has the discretion to approve or deny their use. Carls also has the right to reallocate the APO or increase it, but the APO cannot be increased by more than 0.5% of Gross Sales in any 12-month period, and the maximum APO cannot exceed 7% of Gross Sales.
Carls maintains separate bookkeeping accounts for all advertising funds and prepares an annual unaudited report on the funds' operations, which is available to franchisees upon written request. While restaurants operated by Carls contribute to the advertising funds at a rate equivalent to that of franchised restaurants, Carls is not obligated to ensure that expenditures benefit each franchisee directly or on a pro rata basis. Generally, Carls aims to spend all advertising payments within the taxable year they are received, or in the following year if not spent initially.