What is the relationship between the Cooperative Advertising fee for Craters & Freighters mentioned in Item 6 and the Individual Advertising Expense referenced in Item 6 and Item 11?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Cooperative Advertising | Proportional share to be determined, but not to exceed 1% of Adjusted Gross Sales. | As incurred. | Payable only if a local advertising cooperative (“Cooperative”) is formed in your Territory. Any contributions you make to the Cooperative will be credited to your Individual Advertising Expense (as described in Item 11). |
- 3.5 Individual Advertising Expense.
Each year throughout the duration of this Agreement, Franchisee must spend the greater of (a) Six Thousand Dollars ($6,000) or (b) one percent (1%) of the Adjusted Gross Sales for the prior calendar year on advertising and promotion of the Franchised Business in the Territory ("Individual Advertising Expense"); provided, however, the Individual Advertising Expense will not exceed Eighteen Thousand Dollars ($18,000) on an annual basis, although Franchisee has the right to spend more than such amount.
Franchisee must submit annual reports to Franchisor reflecting advertising expenditures, which must be utilized only for marketing, promotions, and advertising of the Franchised Business.
Franchisor reserves the right to require Franchisee to pay a portion or the entire amount of such Individual Advertising Expense to an approved supplier of Franchisor.
What This Means (2025 FDD)
According to Craters & Freighters's 2025 Franchise Disclosure Document, if a local advertising cooperative is formed in a franchisee's territory, the franchisee will be required to contribute a proportional share to the cooperative. This contribution is capped at 1% of the franchisee's Adjusted Gross Sales. Any contributions made to the Cooperative will be credited towards the franchisee's Individual Advertising Expense, as detailed in Item 11. This means that money spent on cooperative advertising counts toward the franchisee's overall advertising obligations.
Item 11 and Item 22 outline the Individual Advertising Expense requirements for Craters & Freighters franchisees. Each year, a franchisee must spend the greater of $6,000 or 1% of the previous calendar year's Adjusted Gross Sales on local advertising and promotion. However, this expense is capped at $18,000 annually, although the franchisee can choose to spend more. Franchisees are required to submit annual reports to Craters & Freighters detailing their advertising expenditures, which must be used solely for marketing and promotion of the franchised business.
Craters & Freighters retains the right to require franchisees to pay their Individual Advertising Expense to an approved supplier. This gives Craters & Freighters some control over how advertising funds are spent, ensuring it aligns with their brand standards and marketing strategies. The cooperative advertising fees provide a mechanism for franchisees to pool resources for potentially more effective regional advertising, while also contributing to their individual advertising obligations.