Is a Chatime franchisee required to participate in a local or regional advertising cooperative?

We require you to spend at least 2.0% of Gross Sales on local marketing ("Local Marketing Expenditure"). You will spend the Local Marketing Expenditure on advertising for your Chatime Store in your local defined territory. The Local Marketing Expenditure is paid to third parties. You may use your own local advertising materials including, without limitation, directory advertising, newspaper ads, digital including social channels, flyers, brochures, coupons, direct mail pieces, specialty and novelty items, and radio and television advertising; provided, however, that you follow our brand guidelines and obtain our prior written approval of all proposed advertising materials at your expense. We will endeavour to approve or disapprove the advertising materials within 10 days after we receive it from you. You are not required to participate in a local or regional advertising cooperative. (Clause 7.1 of the Franchise Agreement).

You must contribute to our system-wide advertising and promotional fund called the Brand Marketing Fund by paying a fee of Two Percent (2 %) of your gross sales. You will pay the Brand Marketing Fund Fee to us on the tenth day of each month based on your Gross Sales for the previous month. (Clause 7.2 of the Franchise Agreement).

The fund will be used to support and pay for advertising, marketing and promotion efforts we designate, and associated administrative expenses with the management of the fund. All marketing materials will be prepared by us or our advertising/public relations/promotional agencies. The fund may be used to pay for the costs of researching, preparing, maintaining, administering and directing advertising and promotional materials and programs in the manner that we decide. We will not use the fund for the costs of soliciting prospective franchisees. In addition, the fund may be used to pay for the costs of the personnel who manage the advertising and promotional programs for the fund and for reasonable administrative costs and overhead incurred in the activities related to the fund. Company-owned and affiliate-owned locations, if any, will contribute to this fund, at the same rate as that required of franchisees. There is no assurance that any portion of your Brand Marketing Fee or the Brand Marketing Fund will be allocated or spent for advertising in your Territory or region of the country. (Clause 7.3 of the Franchise Agreement).

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 27–35)