How are the costs determined for Checkersrallys marketing, advertising, and promotional materials furnished to franchisees?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ve NPF contributions during the preceding twelve (12) month period, or as otherwise provided by the organizational documents of the NPF.
Notwithstanding anything to the contrary contained herein, the NPF may be used to promote other restaurant concepts that we or any of our Affiliates own or franchise (including [INSERT OPPOSITE BRAND: "Checkers"/"Rally's")]. We shall have no liability for the allocation of funds of NPF to any such other restaurant concepts.
10.02 Your Advertising.You agree to spend on advertising and promoting the Franchised Restaurant such amounts as we establish at any time and from time to time. We require you to spend a minimum of four and one-half percent (4.5%) of
Net Sales during each of your fiscal quarters on advertising and promoting the Franchised Restaurant, however, your advertising spending could exceed this amount if you are a member of a local or regional advertising cooperative whose required contribution rate, when added to your required advertising spending obligations (including contributions to the NPF), exceeds four and one-half percent (4.5%) of Net Sales. For these purposes, we will credit the following types of advertising expenditures toward this requirement: (a) amounts contributed to the NPF (other than the Initial Advertising Deposit); (b) amounts contributed to an advertising cooperative or an advertising purchasing collective; and (c) amounts spent for advertising and promoting your Franchised Restaurant media, such as television, radio, newspaper, billboards, posters, direct mail, yellow pages, collateral promotional and novelty items (e.g. Checkers taxicabs), advertising on public vehicles, such as cabs and buses, and, if not provided by us, the cost of producing approved materials necessary to participate in these media. Advertising expenditures do not include amounts spent for items which we, in our reasonable judgment, deem inappropriate for meeting the minimum advertising requirement, including permanent on-premises signs and menu boards, lighting, menus, vehicle maintenance (even though such vehicles may display the Marks), premiums, discounts, free offers, and employee incentive programs.
You must submit to us for our prior approval, samples of all advertising and promotional materials not prepared or previously approved by us and which vary from our standard advertising and promotional materials. You may not use any advertising or promotional materials that we have disapproved.
We have the right to establish local and/or regional advertising cooperatives for "Checkers" and/or "Rally's" restaurants in your local or regional area, covering such geographical areas as we may designate at any time and from time to time. You must participate in such advertising cooperative and its programs (other than price advertising, as to which you may choose not to participate) and abide by its by-laws. You must contribute such amounts to the advertising cooperative(s) as they determine at any time and from time to time in accordance with their by-laws. Any Restaurants owned by us or any of our Affiliates located in such designated local or regional area(s) will contribute to the cooperative(s) on the same basis. Contributions to such local and regional advertising cooperatives are credited toward the 4.5% advertising expenditures required by this Section; however, if we provide you and your local and/or regional advertising cooperative ninety (90) days' notice of a special regional promotion, you must participate in such promotion and pay to us any regional advertising fees assessed in connection therewith, beginning on the effective date of such notice and continuing until such regional promotion is concluded. Any such special regional advertising fees shall be in addition to, and not credited towards, the 4.5% advertising expenditure required by this Section.
If your Franchised Restaurant is located in a geographical area where we have not established an advertising cooperative, then, at our option, you will be required to either (i) spend the difference between the current NPF contribution rate and 4.5% of your Net Sales marketing your Franchised Restaurant in your local market, (ii) contribute to an advertising purchasing collective that we establish and control (which may not be governed by by-laws similar to a typical local or regional advertising cooperative where you will have voting rights), or (iii) join a local or regional cooperative that we create in your designated marketing area. If we require you to contribute to an advertising purchasing collective, we will provide you with an accounting of the amount spent in your designated marketing area.
You agree not to promote, offer or sell any products or services relating to your Franchised Restaurant, or to use any of the Marks, through the Internet without our consent, which consent may be withheld for any reason or no reason. In connection with any such consent, we may establish such requirements as we deem appropriate, including (a) obtaining our prior written approval of any Internet domain name and home page addresses; (b) submission for our approval of all Web site pages, materials and content; (c) use of all hyperlinks and other links; (d) restrictions on use of any materials (including text, video clips, photographs, images and sound bites) in which any third party has any ownership interest; and (e) obtaining our prior written approval of any modifications.
11. RECORDS AND REPORTS.
11.01 Records.You agree to prepare and to maintain for 3 years complete and accurate books, records (including invoices and records relating to your advertising expenditures) and accounts (using our standard chart of accounts) for the Franchised Restaurant, copies of your sales tax returns and such portions of your state and federal income tax returns as relate to the Franchised Restaurant. All such books and records shall be kept at the Premises, unless we otherwise approve.
You must record all sales on electronic cash registers designated or approved by us at any time and from time to time. You may be required to use computers and computer-based cash registers which are fully compatible with our computer system and which include an information interface capability to communicate electronically with our computer system. We may require you to obtain, and at any time and from time to time update and/or upgrade, equipment, software and/or related services for record keeping and reporting purposes, including facilitating communications between your computers and computer-based cash registers and our computer system. We have the right to use the data we collect for any purpose, except that we shall not provide financial data to third parties, outside of our System or network of Restaurants, in such a form that readily identifies the Franchised Restaurant, unless we are required to do so by law, regulation, or order. If we require you to use proprietary software, you agree to execute and comply with such software license
agreements as we deem necessary to protect our interests, and you agree to pay such license, training, and maintenance fee as we deem reasonably appropriate.
11.02 Periodic Reports.You must furnish us: (a) no later than the fifth (5th) day following the end of each Bi-weekly Period, a report of Net Sales for such Biweekly Period; (b) no later than the fifteenth (15th) day following the end of each calendar month, an income statement and statement of cash flow for the Franchised Restaurant for such calendar month and for the year-to-date and a balance sheet as of the end of such month; (c) within ninety (90) days after the end of each Fiscal Year, a year-end balance sheet and income statement and statement of cash flow of the Franchised Restaurant for such Fiscal Year, reflecting all year-end adjustments and accruals; and (d) such other information as we may require at any time and from time to time, including food and labor cost reports and sales and income tax statements.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys FDD, franchisees are required to spend a minimum of 4.5% of Net Sales on advertising and promoting their franchised restaurant. However, this amount could be higher if the franchisee is a member of a local or regional advertising cooperative with a required contribution rate that, when combined with other advertising obligations, exceeds 4.5% of Net Sales. The franchisor establishes the amounts to be spent on advertising and promotion. Expenditures that count toward this requirement include contributions to the National Production Fund (NPF), advertising cooperatives, advertising purchasing collectives, and amounts spent on approved media such as television, radio, newspapers, billboards, direct mail, and promotional items.
Checkersrallys has the right to establish local and/or regional advertising cooperatives, and franchisees must participate in these cooperatives and contribute as determined by the cooperative's by-laws. These contributions are credited toward the 4.5% advertising expenditure requirement. However, Checkersrallys can also require participation in special regional promotions, with associated fees that are in addition to the standard advertising expenditure. If a restaurant is in an area without an advertising cooperative, Checkersrallys can require the franchisee to spend the difference between the NPF contribution rate and 4.5% of Net Sales on local marketing, contribute to an advertising purchasing collective controlled by Checkersrallys, or join a local or regional cooperative created by Checkersrallys.
Checkersrallys may also establish and administer a National Production Fund (NPF) for creating marketing materials and advertising campaigns. Franchisees must contribute to the NPF as determined by Checkersrallys, up to a maximum of 3% of Net Sales, payable semi-monthly along with royalty fees. The NPF is used for various marketing activities, including preparing video, audio, and written materials, developing websites, administering regional advertising programs, and supporting public relations and market research. Checkersrallys directs all programs financed by the NPF, including the creative concepts, materials, and media placement.
Franchisees must submit all advertising and promotional materials not already approved by Checkersrallys for prior approval, and they cannot use any disapproved materials. For new restaurants, franchisees must contribute $15,000 to the NPF as an Initial Advertising Deposit, which Checkersrallys uses to conduct an initial advertising and promotional program for the restaurant. After deducting incurred costs, any remaining amount from the Initial Advertising Deposit will be credited towards the franchisee's required advertising contributions to the NPF or local advertising cooperative. Checkersrallys does not guarantee the effectiveness of this initial program and has no obligation to account for the Initial Advertising Deposit beyond the general accounting for the NPF.