How is the monthly Brand Development Fee calculated for a Deka Lash franchise?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
We reserve the right to form, change, dissolve or merge any Local Advertising Cooperative. (Franchise Agreement, Section 7.5).
Brand Development Fees. We require you to contribute a monthly Brand Development Fee equal to the greater of 3% of Gross Studio Sales or, after one year of being open, $500 per month. We may use the Brand Development Fund to pay for any costs incurred through third parties or our employment of personnel primarily dedicated to consumer marketing and promotion activities associated with advertising, promotional events, graphic design, photography, video production, branding, public relations, marketing, promotional materials, media, production, and any other activity we believe will benefit Deka Lash, including the creation, maintenance, optimization, and advertising of the company website or other websites, pay per click advertising, and administration of such, creating, conducting, and managing social media, creating, maintenance and promotion of appointment setting software, contests, direct mailers, promotions, and providing promotional materials to our franchisees. We may also use these fees for the support of creation and execution of all materials. We have the right to develop all media and marketing programs (internally or through outside vendors), and have the final decision on all promotions, creative concepts, and media. We may add information about franchise opportunities to advertising and activities supported by the Brand Development Fee. We do not guarantee that you will benefit from the Brand Development Fund in proportion to your contributions. We will not use the Brand Development Fund to defray the cost of our general operating expenses except for reasonable allocation of overhead, including pro-rata amount of salaries and facilities, used to develop, research and administer the promotions, products and activities covered by the Brand Development Fees. By making a written request to us, you may obtain an annual unaudited financial statement of the Brand Development Fund, at the expense of the Brand Development Fund, available 120 days after our fiscal year end. If we do not spend all Brand Development Fees received in a given year, we roll them over and apply them to the Brand Development Fund in the following year. We may use Brand Development Fees to pay for an independent audit of the Brand Development Fund, if we choose to
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 32–40)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, franchisees are required to pay a monthly Brand Development Fee. This fee is calculated as the greater of two amounts: 3% of the Gross Studio Sales or, after the studio has been open for one year, a flat rate of $500 per month.
The Brand Development Fund is used by Deka Lash for various marketing and promotional activities. These activities include advertising, promotional events, graphic design, photography, video production, branding, public relations, and creating promotional materials. The fund also supports the creation, maintenance, and optimization of the company website and social media presence, as well as pay-per-click advertising and the administration of these efforts. Deka Lash has the right to develop all media and marketing programs and has the final say on all promotions, creative concepts, and media.
It is important to note that Deka Lash does not guarantee that franchisees will directly benefit from the Brand Development Fund in proportion to their contributions. The funds are managed at the discretion of Deka Lash, and franchisees may not see an immediate or direct return on their investment. Franchisees can request an annual unaudited financial statement of the Brand Development Fund, available 120 days after the fiscal year end, to understand how the funds are being used. Any unspent fees are rolled over and applied to the fund in the following year. Deka Lash may also use these fees to pay for an independent audit of the Brand Development Fund, if they choose to have it audited.
In the fiscal year ending December 31, 2023, Deka Lash collected $508,197 in Brand Development Fees and spent a total of $797,535. This indicates that the company spent more on brand development than it collected in fees during that period. This information is useful for prospective franchisees to understand the scale of marketing efforts and the company's investment in brand development.