What is the formula for calculating the Individual Advertising Expense for a Craters & Freighters franchise?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Individual Advertising Expense | Greater of (a) $6,000, or (b) one percent (1%) of your Adjusted Gross Sales for the prior calendar year. In either case, this amount will not exceed $18,000. | As incurred. | Each year, you must spend this amount on advertising and promotion of your Franchised Business in your Territory. You must submit annual reports to us reflecting advertising expenditures, which must be utilized only for marketing, promotions, and advertising of the Franchised Business. We reserve the right to require you to pay the amount of the Individual Advertising Expense to a designated or approved supplier of ours. |
| Technology Fee | Currently $500 per month. We reserve the right to increase this amount upon 30 days written notice to you. However, this amount will not exceed $750 per month. | Same as Royalty Fee. |
Source: Item 6 — OTHER FEES (FDD pages 12–16)
What This Means (2025 FDD)
According to Craters & Freighters's 2025 Franchise Disclosure Document, the Individual Advertising Expense is calculated as the greater of two amounts: $6,000, or one percent (1%) of your Adjusted Gross Sales for the prior calendar year. However, the expense will not exceed $18,000.
This means that each year, a Craters & Freighters franchisee must spend a minimum of $6,000 on advertising and promotion. If one percent of the franchisee's Adjusted Gross Sales from the previous year exceeds $6,000, then the franchisee must spend that higher amount, up to a maximum of $18,000. For example, if a franchisee's Adjusted Gross Sales were $500,000, one percent would be $5,000, so they would still only be required to spend the minimum of $6,000. However, if their Adjusted Gross Sales were $1,000,000, one percent would be $10,000, so they would be required to spend $10,000 on advertising.
The FDD specifies that Craters & Freighters franchisees must submit annual reports reflecting their advertising expenditures, and these funds must be used only for marketing, promotions, and advertising of the Franchised Business. Craters & Freighters retains the right to require franchisees to pay the Individual Advertising Expense to a designated or approved supplier.
It is important for prospective franchisees to understand this expense, as it can significantly impact their operating costs. Franchisees should factor this advertising commitment into their financial projections and business plans. They should also inquire about approved advertising methods and suppliers to ensure they can effectively meet this requirement.