Can Craters & Freighters require a franchisee to pay the Individual Advertising Expense to an approved supplier?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Each year, you must spend the greater of (a) $6,000, or (b) one percent (1%) of your Adjusted Gross Sales for the prior calendar year, on advertising and promotion of your Franchised Business in your Territory ("Individual Advertising Expense"). In either case, the amount of the Individual Advertising Expense will not exceed $18,000. You must submit annual reports to us reflecting your advertising expenditures. These funds are reserved only for marketing, promotions, and advertising of your Franchised Business. This expense will be incurred in addition to your required contributions to the Marketing Fund, as described below. You may not advertise outside your Territory without our approval, which may be withheld in our sole discretion. We reserve the right to require you to pay the amount of the Individual Advertising Expense to an approved supplier of ours. We will count all amounts you contribute to a Cooperative towards your required Individual Advertising Expense.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 22–29)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, franchisees are required to spend a minimum amount annually on local advertising. Specifically, a franchisee must spend the greater of $6,000 or 1% of their prior year's Adjusted Gross Sales on advertising and promotion within their territory. This expense, termed the "Individual Advertising Expense," is capped at $18,000.
The FDD stipulates that Craters & Freighters retains the right to mandate that franchisees pay their Individual Advertising Expense directly to a supplier approved by Craters & Freighters. This means that instead of independently managing their local advertising budget, franchisees might be required to use a vendor selected by the franchisor.
This provision gives Craters & Freighters control over how franchisees' advertising funds are spent, potentially ensuring brand consistency and leveraging negotiated rates with preferred vendors. However, it also limits the franchisee's autonomy in choosing advertising methods and vendors that they believe are most effective for their local market. Franchisees are still required to submit annual reports to Craters & Freighters detailing their advertising expenditures, regardless of whether they manage the spending themselves or pay an approved supplier.