Are Casiola franchisees required to pay fees to Franchisor's affiliate as part of Advertising Contributions for a Casiola franchise?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
"Advertising Contributions" means any and all obligations of Franchisee to contribute to and/or pay fees to Franchisor or Franchisor's affiliate or designees as set forth in this Agreement including, but not limited to, the Brand Development Fund Fees set forth in Article 9.A. of this Agreement and Advertising Cooperative contributions and contributions set forth in Article 9.C. of this Agreement.
(1) If Franchisor previously instituted or, in the future, institutes an Advertising Cooperative that includes, in whole or in part, Franchisee's Operating Market or Franchisee's Casiola Business Location, Franchisee shall participate in and make such on-going financial contributions to the Advertising Cooperative, as determined by the Advertising Cooperative;
(2) Franchisor may establish foundational and organizational requirements of the Advertising Cooperative including voting provisions that allows the Advertising Cooperative to make decisions based on the simple majority vote (one vote per franchisee Casiola Business located within the designated area of the Advertising Cooperative) with a quorum constituting 25% of those franchisees within the Advertising Cooperative;
(8) Casiola Businesses owned by Franchisor and/or Franchisor's affiliates that are located within the geographic area of the designated Advertising Cooperative are not required to make contributions to the Advertising Cooperative; and
At all times Franchisor, in Franchisor's Reasonable Business Judgment, possesses the right to authorize, establish, designate and de-authorize a local or regional advertising cooperative within those markets that Franchisor designates (the "Advertising Cooperative"). Franchisee agrees that Franchisor possesses the sole and exclusive right to designate any geographic area in which two or more Casiola Business franchises are located as a region for the purpose of establishing an Advertising Cooperative. If Franchisee's Casiola Business or Operating Market is located within the geographic area of an Advertising Cooperative, franchisee must participate in and contribute to the Advertising Cooperative.
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, franchisees may be required to pay fees to Casiola's affiliate as part of their advertising contributions. The document defines "Advertising Contributions" as any obligations to contribute to or pay fees to Casiola, its affiliates, or designees. This includes Brand Development Fund Fees and Advertising Cooperative contributions. Therefore, if Casiola designates that franchisees must contribute to an advertising cooperative, and that cooperative is considered an affiliate, franchisees will be obligated to pay those fees.
Casiola franchisees may be required to participate in a local or regional advertising cooperative if one is established in their operating market. If a franchisee's Casiola Business or Operating Market is located within the geographic area of an Advertising Cooperative, the franchisee must participate in and contribute to it. The amount of these contributions is determined by the Advertising Cooperative, but cannot exceed the franchisee's minimum local marketing obligations.
Franchisees should be aware that Casiola retains significant control over these advertising cooperatives. Casiola has the right to authorize, establish, designate, and de-authorize these cooperatives. Casiola also sets foundational and organizational requirements, including voting provisions. All marketing plans and media developed by the Advertising Cooperative are subject to Casiola's review and approval. Casiola businesses owned by Casiola or its affiliates within the cooperative's geographic area are not required to contribute to the Advertising Cooperative. This could potentially create an uneven playing field where franchisees are subsidizing advertising efforts that also benefit company-owned locations.