What is Chocolate Bash's obligation regarding the use of the Marketing Fund?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
5.5)
Advertising
Our obligation. We will use the Marketing Fund only for marketing and related purposes and costs. Media coverage is primarily local. We use outside vendors and consultants to produce advertising. We are not required to spend any amount of advertising in the area or territory where any particular franchisee is located. We will maintain the brand website (which will be paid for by the Marketing Fund). We have no other obligation to conduct advertising.
Your own advertising material. You may use your own advertising or marketing material only with our approval. To obtain our approval, you must submit any proposed advertising or marketing material at least 14 days prior to use. If we do not respond, the material is deemed rejected. If you develop any advertising or marketing materials, we may use those materials for any purpose, without any payment to you.
Advertising council. We do not have an advertising council composed of franchisees. The franchise agreement does not give us the power to form an advertising council.
Local or Regional Advertising Cooperatives. We do not currently have any local or regional advertising cooperatives. We have the right to require you to participate in a local or regional advertising cooperative. We will define the area of the cooperative based on media markets, or other geographic criteria that we deem appropriate. Each franchisee in the area would have one vote per outlet (unless the franchisee is in default under its franchise agreement). The amount you must contribute to the cooperative will be determined by vote of the members, but not less than 1% of gross sales. If our own outlets are members of a cooperative, they must contribute to the cooperative on the same basis as franchisees, and they will vote on the same basis as other members. If our outlets have controlling voting power, there is no maximum on fees that could be imposed. We administer the cooperative, but we have the right to delegate responsibility for administration to an outside company such as an advertising agency or accounting firm, or to the franchisee members of the cooperative. We have the right to require the cooperative to operate from written bylaws or other governing documents that we determine. The documents are not
currently available for you to review. Cooperatives will prepare annual financial statements which will be made available for review only by us and by the members of cooperative. We have the power to require cooperatives to be formed, changed, dissolved, or merged.
Advertising Fund. You and all other franchisees must contribute to our Marketing Fund. Your contribution is 1% of gross sales per week. We reserve the right to have other franchisees contribute a different amount or at a different rate. Outlets that we own are not obligated to contribute to the Marketing Fund. We administer the fund. The fund is not audited. We will make unaudited annual financial statements available to you upon request.
If less than all marketing funds are spent in the fiscal year in which they accrue, the money will remain in the Marketing Fund to be spent in the next year. In 2023 we spend all the funds collected for the Marketing Fund.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 19–25)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, Chocolate Bash will administer the Marketing Fund and use it only for marketing and related purposes and costs. Media coverage is primarily local, and Chocolate Bash uses outside vendors and consultants to produce advertising. Chocolate Bash is not required to spend any amount of advertising in the area or territory where any particular franchisee is located but will maintain the brand website, which will be paid for by the Marketing Fund. Chocolate Bash has no other obligation to conduct advertising.
Chocolate Bash franchisees are required to contribute 1% of gross sales per week to the Marketing Fund, although Chocolate Bash reserves the right to have other franchisees contribute a different amount or at a different rate. Chocolate Bash-owned outlets are not obligated to contribute to the Marketing Fund. The fund is not audited, but Chocolate Bash will make unaudited annual financial statements available to franchisees upon request. If less than all marketing funds are spent in the fiscal year in which they accrue, the money will remain in the Marketing Fund to be spent in the next year. In 2023, Chocolate Bash spent all the funds collected for the Marketing Fund. No money from the Marketing Fund is spent principally to solicit new franchise sales.
Chocolate Bash also has the right to require franchisees to participate in a local or regional advertising cooperative. The area of the cooperative will be defined based on media markets or other geographic criteria that Chocolate Bash deems appropriate. Each franchisee in the area would have one vote per outlet (unless the franchisee is in default under its franchise agreement). The amount franchisees must contribute to the cooperative will be determined by vote of the members, but not less than 1% of gross sales. If Chocolate Bash's own outlets are members of a cooperative, they must contribute to the cooperative on the same basis as franchisees, and they will vote on the same basis as other members. If Chocolate Bash's outlets have controlling voting power, there is no maximum on fees that could be imposed. Chocolate Bash administers the cooperative but has the right to delegate responsibility for administration to an outside company such as an advertising agency or accounting firm, or to the franchisee members of the cooperative. Chocolate Bash has the right to require the cooperative to operate from written bylaws or other governing documents that they determine. Cooperatives will prepare annual financial statements which will be made available for review only by Chocolate Bash and by the members of cooperative. Chocolate Bash has the power to require cooperatives to be formed, changed, dissolved, or merged.
After opening, franchisees must spend at least 4% of gross sales each month on marketing their business. Franchisees may use their own advertising or marketing material only with Chocolate Bash's approval. To obtain approval, franchisees must submit any proposed advertising or marketing material at least 14 days prior to use. If Chocolate Bash does not respond, the material is deemed rejected. If franchisees develop any advertising or marketing materials, Chocolate Bash may use those materials for any purpose, without any payment to the franchisee.