Can Chocolate Bash require the advertising cooperative to operate from written bylaws?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
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 has the authority to mandate that any local or regional advertising cooperative operates under written bylaws or other governing documents that Chocolate Bash determines.
This means that as a Chocolate Bash franchisee, you may be required to participate in a local or regional advertising cooperative if Chocolate Bash chooses to establish one. The area of the cooperative will be defined by Chocolate Bash based on media markets or other geographic criteria. Each franchisee within the cooperative area gets one vote per outlet, unless they are in default of their franchise agreement. The amount each franchisee contributes will be determined by the members' vote, but it will not be less than 1% of gross sales.
Chocolate Bash also retains significant control over these cooperatives. They administer the cooperative or can delegate this responsibility to an outside company or the franchisee members. Furthermore, Chocolate Bash has the power to form, change, dissolve, or merge cooperatives. While cooperatives will prepare annual financial statements, these statements are only available for review by Chocolate Bash and the cooperative members, not the general public.
If Chocolate Bash's own outlets are members of a cooperative, they must contribute and vote on the same basis as franchisees. However, if Chocolate Bash's outlets have controlling voting power within the cooperative, there is no limit to the fees that could be imposed on the members. This gives Chocolate Bash considerable influence over the financial obligations of franchisees within the cooperative.