Is the 'Local Marketing Expenditure' for Chatime based on Gross Sales?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: Receipts]
7.1 Local Marketing Expenditure
- (1) Franchisee must:
- (a) Establish, maintain and administer a Franchisee-funded marketing fund to be spent for local marketing, which will be known as the Local Marketing Expenditure for the Outlet;
- (b) Direct the creation and implementation of advertising, marketing, and promotional programs for the Territory;
- (c) Adapt the marketing materials provided to Franchisee by Franchisor for use in the Territory;
- (d) Keep full details and records of all Local Marketing Expenditure receipts and expenditure on a monthly basis;
- (e) Allow Franchisor full and free access at all reasonable times to all details of the Local Marketing Expenditure and records;
- (f) Comply with all reasonable directions given by Franchisor from time to time in relation to the administration of the Local Marketing Expenditure and in relation to
the content, style, nature or manufacture of any advertising, sales promotion and customer satisfaction surveys;
- (g) Comply with Franchisor's brand guidelines and obtain the prior written approval of Franchisor for all of its local advertising and promotional plans and all materials it would like to use. Achieving compliance and obtaining such approval shall be at the expense of Franchisee;
- (h) At all times ensure that all marketing, promotion, and advertising complies with all applicable laws; and
- (i) Follow Franchisor's policy on marketing funds as specified in the Operations Manual or the Global Policies and Procedures as amended from time to time. The provisions of such policies and procedures will override this clause to the extent of any inconsistency.
7.2 Brand Marketing Fee
Franchisee must pay the Brand Marketing Fee to Franchisor on the tenth day of each Month. The Brand Marketing Fee will be determined based on the Gross Sales of the Outlet for the previous Month.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the Local Marketing Expenditure is a franchisee-funded marketing fund. Franchisees are required to establish, maintain, and administer this fund, which is specifically designated for local marketing efforts for their Chatime outlet.
Chatime franchisees are responsible for directing the creation and implementation of advertising, marketing, and promotional programs within their designated territory. They also need to adapt marketing materials provided by Chatime to suit local conditions. It is important to note that franchisees must keep detailed records of all Local Marketing Expenditure receipts and spending on a monthly basis, and they must provide Chatime with full access to these records at any reasonable time.
While the FDD outlines the requirements for establishing and managing the Local Marketing Expenditure, it does not specify that the amount is based on a percentage of gross sales. The document does state that the Brand Marketing Fee is determined based on the Gross Sales of the Outlet for the previous Month. Franchisees should inquire with Chatime about how the required amount for the Local Marketing Expenditure is determined and what percentage of gross sales, if any, they should expect to allocate to this fund.