What is the minimum total combined advertising expenditure obligation for a Checkersrallys franchisee?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to the 2025 Checkersrallys FDD, franchisees are obligated to spend a minimum of 4.5% of Net Sales on advertising and promoting their restaurant each fiscal quarter. This advertising expenditure can be allocated to several areas. These include contributions to the National Production Fund (NPF), contributions to advertising cooperatives or purchasing collectives, and direct spending on approved advertising media. Examples of approved media include television, radio, newspapers, billboards, direct mail, and promotional items.
However, not all advertising-related expenses qualify towards meeting this minimum requirement. Checkersrallys will not credit expenditures on permanent on-premises signs, menu boards, lighting, vehicle maintenance, premiums, discounts, free offers, or employee incentive programs towards the 4.5% minimum. Franchisees must also seek prior approval from Checkersrallys for any advertising materials that deviate from the standard materials provided by the company.
Checkersrallys also has the right to establish local or regional advertising cooperatives, in which franchisees must participate (excluding price advertising). Contributions to these cooperatives count toward the 4.5% advertising expenditure requirement. However, Checkersrallys can require franchisees to participate in special regional promotions with additional fees that do not count towards the minimum 4.5% spend. If a franchisee is in an area without an advertising cooperative, Checkersrallys may require them to spend the difference between the NPF contribution and 4.5% of Net Sales on local marketing, contribute to an advertising purchasing collective, or join a cooperative created by Checkersrallys.