Can Desi District establish market advertising and promotional cooperative funds?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
anchise Group.** Desi District Franchise Group may use any marketing materials or campaigns developed by or on behalf of Franchisee, and Franchisee hereby grants an unlimited, perpetual, royalty-free license to Desi District Franchise Group for such purpose.
- 9.3 Market Cooperatives. Desi District Franchise Group may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative. If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days. Desi District Franchise Group shall not require
Franchisee to be a member of more than one Market Cooperative. If Desi District Franchise Group establishes a Market Cooperative:
- (a) Governance. Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Desi District Franchise Group. Desi District Franchise Group may require the Market Cooperative to adopt bylaws or regulations prepared by Desi District Franchise Group. Unless otherwise specified by Desi District Franchise Group, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. Desi District Franchise Group will be entitled to attend and participate in any meeting of a Market Cooperative. Any Desi District business owned by Desi District Franchise Group in the Market Cooperative shall have the same voting rights as those owned by its franchisees. Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement. If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, Desi District Franchise Group may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose. Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to Desi District Franchise Group's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval. No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Desi District Franchise Group pursuant to Section 9.1. Desi District Franchise Group may designate the national or regional advertising agencies used by the Market Cooperative.
- (d) Funding. The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% and not more than 5% of Gross Sales.
- (e) Enforcement. Only Desi District Franchise Group will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
- (f) Termination. Desi District Franchise Group may terminate any Market Cooperative. Any funds left in a Market Cooperative upon termination will be transferred back to the Franchisees based on their contributions.
- 9.4 Required Spending. Franchisee shall spend up to 2% of Gross Sales each month on marketing the Business. Upon request of Desi District Franchise Group, Franchisee shall furnish proof of its compliance with this Section. Desi District Franchise Group has the sole discretion to determine what activities constitute "marketing" under this Section. Desi District Franchise Group may, in its discretion, determine that if Franchisee contributes to a Market Cooperative, the amount of the contribution will be counted towards Franchisee's required spending under this Section.
9.5 Market Introduction Plan. Franchisee must develop a market introduction plan and obtain Desi District Franchise Group's approval of the market introduction plan at least 30 days before the projected opening date of the Business.
ARTICLE 10. RECORDS AND REPORTS
10.1 Systems. Franchisee shall use such customer data management, sales data management, administrative, bookkeeping, accounting, and inventory control procedures and systems as Desi District Franchise Group may specify in the Manual or otherwise in writing.
10.2 Reports.
- (a) Financial Reports.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, Desi District Franchise Group has the option to establish market advertising and promotional cooperative funds, referred to as "Market Cooperative," in specific geographic areas. If a Market Cooperative exists in the franchisee's location when they start operations, they must immediately join. If a Market Cooperative is created later, the franchisee has 30 days to become a member. Desi District will not require a franchisee to be a member of more than one Market Cooperative.
Desi District determines the organization, governance, and start date of each Market Cooperative and may require the adoption of bylaws or regulations they prepare. Unless Desi District specifies otherwise, the activities of the Market Cooperative are decided by a majority vote of its members, and Desi District is entitled to attend and participate in any meeting. Any Desi District business owned by Desi District Franchise Group in the Market Cooperative has the same voting rights as those owned by its franchisees. Each business owner gets one vote per business owned, unless they are in default under their franchise agreement.
The purpose of each Market Cooperative is to manage regional advertising and marketing programs and develop standardized promotional materials, subject to Desi District's approval, for local advertising and promotion. All advertising and promotional plans or materials must be approved by Desi District. Desi District can also designate the national or regional advertising agencies used by the Market Cooperative. The majority vote of the Market Cooperative determines the dues to be paid by members, which will be between 1% and 5% of Gross Sales. Desi District retains the right to enforce the obligations of franchisees to contribute to the Market Cooperative and may terminate any Market Cooperative. Upon termination, any remaining funds will be returned to the franchisees based on their contributions.
Franchisees are required to spend up to 2% of Gross Sales each month on marketing the Business, and Desi District has the discretion to determine what activities constitute "marketing." Desi District may determine that contributions to a Market Cooperative count towards this required spending. If the members of a Market Cooperative cannot agree on how to spend the Market Cooperative's money, Desi District may assume decision-making authority after providing 10 days' notice to the members.