What is the relationship between the Cooperative Advertising fee for Craters & Freighters (Item 6) and the franchisee's obligation to comply with the restrictions on sources of products and services (Item 8)?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
If a Cooperative has been established for a geographic area where your Craters & Freighters Franchised Business is located when the Franchise Agreement is signed, or if any Cooperative is established during the term of the Franchise Agreement, you must become a member of the Cooperative and abide by the rules of the Cooperative. Cooperatives will set their own fees, which cannot exceed one percent (1%) of Adjusted Gross Sales. Franchisor-owned outlets must contribute to the fund on the same basis as franchisees. Each Cooperative established must prepare annual statements which will be available for review by its members. We reserve the right to form, change, dissolve or merge any Cooperative at any time.
You may develop advertising media for your own use, at your own cost providing all media is in compliance with current branding and System Standards. We must approve the advertising materials in advance and in writing. We do not have an advertising council composed of franchisees.
We have the sole right to market on the Internet and use our trademarks on the Internet, including all use of websites, domain names, URLs, directory addresses, email addresses, metatags, linking, advertising, cobranding and other arrangements, and in all other forms of electronic media.
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Craters & Freighters franchisees may be required to participate in a Cooperative Advertising program. If a Cooperative is established in the franchisee's area, either at the time of signing the Franchise Agreement or during its term, the franchisee must become a member and adhere to its rules. These Cooperatives are designed to manage advertising programs and develop promotional materials, subject to Craters & Freighters' approval.
The fees for these Cooperative Advertising programs are determined by the individual cooperatives, but they cannot exceed one percent of Adjusted Gross Sales. Craters & Freighters-owned outlets are also required to contribute to the fund on the same basis as franchisees, ensuring equitable participation. Each Cooperative must prepare annual statements available for review by its members, promoting transparency in fund management. Craters & Freighters retains the right to form, change, dissolve, or merge any Cooperative at any time, providing flexibility in managing the advertising strategy.
Regarding restrictions on sources of products and services, Craters & Freighters allows franchisees to request approval for suppliers not already approved by the company. The franchisor will review such requests based on criteria like the supplier's ability to provide sufficient quantities, the quality and pricing of products, production and delivery capabilities, and the supplier's reputation. Craters & Freighters estimates that purchases from approved sources or those meeting their standards will account for approximately 0% of the initial investment and 2% to 3% of the total cost of operating the franchise. The FDD does not explicitly state any direct relationship between the Cooperative Advertising fee and the restrictions on sources of products and services.
In summary, while franchisees are obligated to comply with restrictions on sourcing, and may be obligated to participate in cooperative advertising, the FDD does not describe any direct connection between these two obligations. Franchisees should note that Craters & Freighters has purchasing cooperatives with certain suppliers and may receive rebates from these suppliers based on franchisee purchases. However, the FDD states that Craters & Freighters does not provide material benefits, such as renewing or granting additional franchises, based on the franchisee's use of designated or approved suppliers and distributors.