Can Desi District require a franchisee to participate in a local or regional advertising cooperative?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Local or Regional Advertising Cooperatives. We do not currently have any local or 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 Desi District's 2024 Franchise Disclosure Document, Desi District has the right to require franchisees to participate in a local or regional advertising cooperative. Desi District will define the cooperative's area based on media markets or other geographic criteria. Each franchisee within the cooperative area will have one vote per outlet, unless they are in default of their franchise agreement.
The amount a franchisee must contribute to the cooperative will be determined by a vote of the members, but it will not be less than 1% and not more than 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 will vote on the same basis as other members.
Desi District will administer the cooperative but has the right to delegate this responsibility to an outside company or to the franchisee members. Desi District also has the right to require the cooperative to operate from written bylaws or other governing documents that they determine. These documents are not currently available for review. The cooperatives will prepare annual financial statements, which will be available for review only by Desi District and the members of the cooperative. Desi District has the power to require cooperatives to be formed, changed, dissolved, or merged.