What is the franchisee's advertising and promotion obligation (APO) for a Carls franchise, and how is it paid?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
formation, meetings or seminars, telephone communications, email communications or other communications. (Franchise Agreement, §12.C.)
- 6. Conduct inspections of the Franchised Restaurant and evaluations of the products sold and services rendered as we deem appropriate or necessary. (Franchise Agreement, §12.D.; Co-Brand Location Addendum, § 7)
Advertising
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.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 41–54)
What This Means (2024 FDD)
According to the 2024 FDD, Carls franchisees have an advertising and promotion obligation (APO) that is paid on a weekly basis. The specific amount is detailed in an appendix to the Franchise Agreement. Currently, the APO is divided, with 1.0% of Gross Sales directed to the Production Fund and 5% of Gross Sales allocated to the Media Fund. These funds are used for advertising, marketing, and public relations efforts.
The franchisee pays a portion of the APO as directed by Carls to the Production Fund. The remaining portion is paid to the Media Fund at the same time and in the same manner as the royalty fee. Carls reserves the right to reallocate or change the APO split between the Production Fund and the Media Fund.
Carls also retains the right to increase the APO, but with limitations. The increase cannot exceed ½% of Gross Sales in any 12-month period, and the maximum required APO will not exceed 7% of Gross Sales. Carls maintains separate bookkeeping accounts for all advertising funds and prepares an unaudited report of the funds' operations annually, which is available to franchisees upon written request. Restaurants operated by Carls contribute to the advertising funds an equivalent amount to that contributed by franchised Restaurants.