Can Desi District require the advertising cooperative to operate from written bylaws?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
r regional advertising cooperatives. We have the right to require you to participate in a local or regional advertising cooperative. We will define the area of the cooperative based on media markets, or other geographic criteria that we deem appropriate. Each franchisee in the area would have one vote per outlet (unless the franchisee is in default under its franchise agreement). The amount you must contribute to the cooperative will be determined by vote of the members, but not less than 1% and not more than 5% of gross sales. If our own outlets are members of a cooperative,
they must contribute to the cooperative on the same basis as franchisees, and they will vote on the same basis as other members. We administer the cooperative, but we have the right to delegate responsibility for administration to an outside company such as an advertising agency or accounting firm, or to the franchisee members of the cooperative. We have the right to require the cooperative to operate from written bylaws or other governing documents that we determine. The documents are not currently available for you to review. Cooperatives will prepare annual financial statements which will be made available for review only by us and by the members of cooperative. We have the power to require cooperatives to be formed, changed, dissolved, or merged.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 31–38)
What This Means (2024 FDD)
According to the 2024 FDD, Desi District has the right to require any local or regional advertising cooperative to operate from written bylaws or other governing documents. These documents are not available for review in the FDD. Desi District also has the power to delegate responsibility for the administration of the cooperative to an outside company, such as an advertising agency or accounting firm, or to the franchisee members of the cooperative.
Each franchisee within the cooperative's area has one vote per outlet, unless they are in default under their franchise agreement. The amount each franchisee contributes to the cooperative is determined by a vote of the members, with contributions ranging from 1% to 5% of gross sales. If Desi District's own outlets are members of the cooperative, they must contribute on the same basis as franchisees and vote on the same basis as other members.
Desi District retains significant control over these advertising cooperatives, including the power to require them to be formed, changed, dissolved, or merged. The annual financial statements of the cooperatives are available for review by Desi District and the members of the cooperative. A prospective franchisee should inquire about the specific content and requirements of these written bylaws, as well as how the cooperative is administered in practice.