For Carvel franchisees, can contributions to an Advertising Cooperative be counted towards the Local Marketing Obligation?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
market advertising. If we require you to spend a minimum amount on local market advertising, we will
specify the minimum amount in Schedule A (the "Local Marketing Obligation") and, upon our request, require you to submit for our written approval an annual local marketing plan. We may change the Local Marketing Obligation, provided that we must give you at least 60 days' written notice of the change. Your Local Marketing Obligation will be in addition to amounts you must pay or spend under Section 3.2.B (Advertising Contribution) and for the Grand Opening Obligation under Section 10.1.C. (Grand Opening Advertising). You will be responsible for determining the amount of advertising funds you spend for individual local market advertising, subject to the Local Marketing Obligation (if any) and our approval of your annual local marketing plan, if applicable.
- (ii) Compliance with the Local Marketing Obligation. Any contributions that you make to an Advertising Cooperative (if one exists) may be counted towards your Local Marketing Obligation. The following expenditures or costs will not count towards your Local Marketing Obligation: salaries, donations, press parties, in-store fixtures or equipment, menus, serving guides and nutritional facts, yellow page advertising, exterior or interior signage, and incentive programs, including costs of honoring coupons and food costs incurred in honoring sales promotions. We have the right to require you to provide documentation that demonstrates your compliance with the Local Marketing Obligation. If you fail to make advertising expenditures in accordance with this Section, we will have the right to spend an amount not to exceed your Local Marketing Obligation on local advertising for you, and you must reimburse us for these expenses. Your failure to comply with this Section10.1.E. is a material breach of this Agreement.
- (iii) Payment to Us. We have the right upon written notice to you to require you to pay all or a portion of the Local Marketing Obligation to us for us to, in our sole discretion, (a) contribute to the Ad Fund (as defined in Section 10.3.A. (Contributions to Ad Fund)), (b) spend on national, regional, or local advertising campaigns, (c) contribute to the Advertising Cooperative (as defined in Section 10.4.A. (Participation)) in your market, or (d) spend on local advertising in your market. If we exercise our right to collect your entire Local Marketing Obligation (and not just a portion of it), you will not be required to (x) spend a minimum amount on local advertising (other than your Grand Opening Obligation), (y) provide a local marketing plan, or (z) participate in, or contribute to, your Advertising Cooperative. We are not obligated to ensure that the Local Marketing Obligation monies that we spend are proportionate or equivalent to your contributions or that the Franchised Business will benefit directly or pro rata or in any amount from the placement of advertising.
10.2 Digital Marketing.
- A. Restrictions.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, contributions to an Advertising Cooperative can be counted towards a franchisee's Local Marketing Obligation. Carvel may require franchisees to participate in local, regional, or national Advertising Cooperatives. If Carvel collects the entire Local Marketing Obligation from a franchisee, the franchisee will not be required to participate in an Advertising Cooperative.
Payments to the Advertising Cooperative are determined by the franchisees and Carvel participating in the cooperative, as outlined in the cooperative's by-laws or membership agreements. These payments will be credited against the franchisee's Local Marketing Obligation, but are in addition to the Advertising Contribution and Grand Opening Obligation.
However, certain expenditures will not count toward the Local Marketing Obligation, including salaries, donations, press parties, in-store fixtures or equipment, menus, serving guides and nutritional facts, yellow page advertising, exterior or interior signage, and incentive programs. Carvel has the right to request documentation to verify compliance with the Local Marketing Obligation. Failure to meet the Local Marketing Obligation may result in Carvel spending the required amount on local advertising and requiring reimbursement from the franchisee, and is considered a material breach of the Franchise Agreement.