What is a Crab N Spice Market Cooperative?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
inancial Statement. CNS Franchising will prepare an unaudited annual financial statement of the Marketing Fund within 120 days of the close of CNS Franchising's fiscal year and will provide the financial statement to Franchisee upon request.
9.4 Marketing Cooperatives. CNS 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. CNS Franchising shall not require Franchisee to be a member of more than one Market Cooperative. If CNS 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 CNS Franchising. CNS Franchising may require the Market Cooperative to adopt bylaws or regulations prepared by CNS Franchising. Unless otherwise specified by CNS Franchising, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. CNS Franchising will be entitled to attend and participate in any meeting of a Market Cooperative. Any Crab N Spice business owned by CNS 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, CNS 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 CNS Franchising's approval) standardized promotional materials for use by the members in local advertising and promotion.
(c) Approval. No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of CNS Franchising pursuant to Section 9.1. CNS Franchising may designate the national or regional advertising agencies used by the Market Cooperative.
(d) Funding. The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% of Gross Sales.
(e) Enforcement. Only CNS Franchising will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
(f) Termination. CNS Franchising may terminate any Market Cooperative. Any funds left in a Market Cooperative upon termination will be transferred to the Marketing Fund.
9.5 Required Spending. Franchisee shall spend at least 2% of Gross Sales each month on marketing the Business. Upon request of CNS Franchising, Franchisee shall furnish proof of its compliance with this Section. CNS Franchising has the sole discretion to determine what activities constitute "marketing" under this Section. CNS Franchising may, in its discretion, determine that if Franchisee contributes to a Market Cooperative, the amount of the contribution will be counted towards Franchisee's required spending under this Section.
Source: Item 22 — CONTRACTS (FDD pages 50–51)
What This Means (2024 FDD)
According to the 2024 Crab N Spice Franchise Disclosure Document, a Market Cooperative is a market advertising and promotional cooperative fund that Crab N Spice may establish in any geographical area. If a Market Cooperative exists for the area encompassing a franchisee's location when they begin operations, the franchisee must immediately become a member. If a Market Cooperative is established after the franchisee has already commenced operations, the franchisee has 30 days to join. Franchisees will not be required to be a member of more than one Market Cooperative.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Crab N Spice. Crab N Spice may require the Market Cooperative to adopt bylaws or regulations prepared by Crab N Spice. Unless otherwise specified by Crab N Spice, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. CNS Franchising may require the Market Cooperative to adopt bylaws or regulations prepared by CNS Franchising.
The purpose of each Market Cooperative is to administer regional advertising and marketing programs and develop standardized promotional materials for use by its members in local advertising and promotion, subject to Crab N Spice's approval. No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Crab N Spice. Crab N Spice may also designate the national or regional advertising agencies used by the Market Cooperative. The majority vote of the Market Cooperative will determine the dues to be paid by members, but not less than 1% of Gross Sales. Only Crab N Spice has the right to enforce the obligations of franchisees to contribute to the Market Cooperative. Crab N Spice may terminate any Market Cooperative, and any funds left upon termination will be transferred to the Marketing Fund.
As a franchisee, understanding the specifics of how these cooperatives operate, including the level of control Crab N Spice retains and the potential financial obligations, is crucial. Franchisees are also required to spend at least 2% of Gross Sales each month on marketing the Business. Prospective franchisees should inquire about the existence of any Market Cooperatives in their target area, the typical contribution amounts, and examples of marketing programs implemented by existing cooperatives.