Is Chop5 Salad Kitchen required to form advertising cooperatives for all regions?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
We may, but need not, form advertising cooperatives for the benefit of all Restaurants located in a particular region. We will determine the boundaries of the cooperative. In most instances, the boundaries will coincide with zip codes, designated marketing areas or municipal boundaries. We will specify the manner in which the cooperative is organized and governed. We may choose between: (a) administering the cooperative ourselves; or (b) establishing an advertising council, comprised by the cooperative's members, to administer the cooperative. We may require that the cooperative be administered in accordance with written bylaws, organizational documents or other governing documents that we approve.
If your Restaurant is located within a region subject to an advertising cooperative you must: (a) participate in the cooperative according to its rules and procedures and abide by its decisions; and (b) pay a cooperative advertising fee. We may set the minimum cooperative advertising fee or we may allow the cooperative to set the fee based on majority vote of its members. In either case, the cooperative advertising fee will not exceed your Local Advertising Commitment. All cooperative advertising fees you pay are credited against your Local Advertising Commitment. Any company-owned Restaurant located in the cooperative will contribute on the same basis as franchisees.
Advertising cooperatives are not required to prepare annual or periodic financial statements. Any financial statements that are prepared will be made available to you upon request. We reserve the right to form, change, merge or terminate advertising cooperatives at any time.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 24–36)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, Chop5 Salad Kitchen is not required to form advertising cooperatives for all regions. The FDD states that Chop5 Salad Kitchen may, but does not have to, form advertising cooperatives for the benefit of restaurants in a particular region. Chop5 Salad Kitchen will determine the boundaries of the cooperative, which will often coincide with zip codes, designated marketing areas, or municipal boundaries.
Chop5 Salad Kitchen can choose to administer the cooperative themselves or establish an advertising council comprised of the cooperative's members. If a Chop5 Salad Kitchen restaurant is located within a region subject to an advertising cooperative, the franchisee must participate in the cooperative and pay a cooperative advertising fee. This fee will not exceed the Local Advertising Commitment, and all cooperative advertising fees paid are credited against this commitment. Any company-owned restaurants located in the cooperative will contribute on the same basis as franchisees.
Chop5 Salad Kitchen also reserves the right to form, change, merge, or terminate advertising cooperatives at any time. Advertising cooperatives are not required to prepare annual or periodic financial statements, but any financial statements that are prepared will be made available to franchisees upon request. This gives Chop5 Salad Kitchen significant flexibility in how they approach regional advertising, but it also means that franchisees may be required to participate in and contribute to a cooperative if one is established in their area.