What does 'Brand Fund' mean for a Chop5 Salad Kitchen franchise?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
| TYPE OF FEE 1 | AMOUNT 2, 3 | DUE DATE | REMARKS |
|---|---|---|---|
| Brand Fund Fee | [1st Year] 0.5% of Gross Sales [2nd Year] 1.0% of Gross Sales [Rest of Term] 1.5% of Gross Sales | Same as royalty fee | You must contribute this amount to the Brand Fund we administer. You have no voting rights pertaining to the administration of the Brand Fund, the creation or placement of advertising, or the amount of the brand fund fee. We may increase the brand fund fee by up to 4% on 180 days' prior notice. The maximum total amount we may charge at any given time for the brand fund fee, Local Advertising Commitment and Cooperative Advertising Fee is capped at 8.5%. |
Notes:
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- Definitions: As used in this Disclosure Document, the following capitalized terms have the meanings given to them below:
- "Brand Fund" means the brand and system development fund that we intend to administer to promote public recognition of our brand and improve our System. We have not established the Brand Fund as of the issuance date of this Disclosure Document.
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- Liquidated Damages: You must pay us liquidated damages if: (a) we terminate the Franchise Agreement
due to your default; or (b) you terminate the Franchise Agreement prior to its expiration date (except in accordance with the provisions governing your right to terminate following our uncured breach). Liquidated damages are calculated as the sum of average weekly royalty fees and brand fund fees imposed during the 52-week period preceding termination (or your entire period of operation if less than 52-weeks) multiplied by the lesser of: (a) 104 (representing 2 years); or (b) the total number of weeks remaining under the term.
Source: Item 6 — OTHER FEES (FDD pages 12–17)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, the Brand Fund is defined as the brand and system development fund that Chop5 Salad Kitchen intends to administer to promote public recognition of their brand and improve their system. As of the issuance date of the 2024 Disclosure Document, Chop5 Salad Kitchen had not yet established the Brand Fund.
Franchisees must contribute to the Brand Fund, with the fee being 0.5% of Gross Sales for the first year, 1.0% for the second year, and 1.5% for the remainder of the franchise term. These payments are due at the same time as royalty fees. While franchisees are required to contribute to the Brand Fund, they have no voting rights regarding its administration, advertising creation or placement, or the Brand Fund fee amount. Chop5 Salad Kitchen retains the right to increase the Brand Fund fee by up to 4% with 180 days' prior notice.
The maximum total amount that Chop5 Salad Kitchen may charge at any given time for the Brand Fund fee, Local Advertising Commitment, and Cooperative Advertising Fee is capped at 8.5% of Gross Sales. This means that if the Local Advertising Commitment and Cooperative Advertising Fee are set at high levels, the Brand Fund fee may be reduced to stay within this cap. In the event that a franchisee terminates the Franchise Agreement early or Chop5 Salad Kitchen terminates the agreement due to the franchisee's default, liquidated damages may include average weekly Brand Fund fees.
It is typical in the franchise industry for franchisors to have a brand fund where franchisees contribute a percentage of gross sales. These funds are used for marketing and advertising efforts to promote the brand as a whole. However, the franchisee typically does not have control over how the fund is spent. Prospective franchisees should inquire about the specific plans for the Brand Fund and how it will benefit their individual locations, given that the fund had not yet been established as of the FDD's issuance date.