Can CB Franchising require a Chocolate Bash franchisee to join a purchasing cooperative?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.4 Marketing Cooperatives. CB Franchising may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas.
If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative.
If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days.
CB Franchising shall not require Franchisee to be a member of more than one Market Cooperative.
If CB Franchising establishes a Market Cooperative:
- (a) Governance.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by CB Franchising.
CB Franchising may require the Market Cooperative to adopt bylaws or regulations prepared by CB Franchising.
Unless otherwise specified by CB Franchising, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
CB Franchising will be entitled to attend and participate in any meeting of a Market Cooperative.
Any Chocolate Bash business owned by CB Franchising in the Market Cooperative shall have the same voting rights as those owned by its franchisees.
Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement.
If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, CB Franchising may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose.
Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to CB Franchising's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, CB Franchising may establish market advertising and promotional cooperative funds, referred to as "Market Cooperative," in specific geographic areas. If a Market Cooperative exists for the area encompassing a franchisee's location when they begin operations, the franchisee must immediately become a member. Similarly, if a Market Cooperative is established during the term of the Franchise Agreement, the franchisee is required to join within 30 days. However, Chocolate Bash will not require a franchisee to be a member of more than one Market Cooperative.
CB Franchising determines the organization, governance, and start date of each Market Cooperative and may require the Market Cooperative to adopt bylaws or regulations prepared by Chocolate Bash. Unless Chocolate Bash specifies otherwise, decisions regarding the activities carried on by each Market Cooperative are decided by a majority vote of its members. Chocolate Bash is entitled to attend and participate in any meeting of a Market Cooperative, and any Chocolate Bash business owned by them in the Market Cooperative has the same voting rights as those owned by its franchisees. Each business owner gets one vote per business owned, but a franchisee in default under their franchise agreement cannot vote.
Each Market Cooperative is devoted exclusively to administering regional advertising and marketing programs and developing standardized promotional materials for use by the members in local advertising and promotion, subject to Chocolate Bash's approval. If the members of a Market Cooperative cannot agree on how to spend the Market Cooperative's funds, Chocolate Bash may assume decision-making authority after providing 10 days' notice to the members of the Market Cooperative.
This means that as a Chocolate Bash franchisee, you may be required to participate in a marketing cooperative if one exists or is created for your area. You will have a vote in the cooperative's activities, but Chocolate Bash retains significant control over its governance and spending. This is a fairly common practice in franchising, as it allows for coordinated marketing efforts and brand consistency at the local level. However, franchisees should be aware of the potential for Chocolate Bash to exert control over the cooperative's decisions.