Are incentive programs for employees or agents of the Devon Creek franchisee included in the franchisee's expenditures on Local Advertising?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
- 13.2.2 Within thirty (30) business days of Franchisor's request, Franchisee shall provide a quarterly expenditure report accurately reflecting Franchisee's Local Advertising expenditures for the preceding quarterly period. The following costs and expenditures incurred by Franchisee shall not be included in Franchisee's expenditures on Local Advertising for purposes of this Section, unless approved in advance by Franchisor in writing: (i) incentive programs for employees or agents of Franchisee; (ii) research expenditures; (iv) salaries and expenses of any of Franchisee's personnel to attend advertising meetings, workshops or other marketing activities; (v) charitable, political or other contributions or donations.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, franchisees are generally not allowed to include incentive programs for their employees or agents as part of their local advertising expenditures, unless they receive prior written approval from Devon Creek. This means that if a franchisee implements a bonus or reward system for their staff based on sales or performance, the cost of these incentives cannot be counted towards the minimum local advertising spend required by the franchise agreement.
Devon Creek mandates that franchisees spend a minimum amount on local advertising, which is the greater of $1,000 per month until the franchisee reaches $250,000 in gross revenue. After that, the minimum spend is the greater of $1,000 or 3% of gross revenue per month. By excluding incentive programs from qualifying local advertising expenditures, Devon Creek ensures that franchisees allocate their advertising budgets towards approved marketing channels and strategies that are likely to benefit the brand and the franchisee's business.
This policy provides Devon Creek with greater control over how advertising funds are spent, ensuring that the money is used for activities that align with the brand's overall marketing strategy. For a prospective franchisee, this means they need to budget separately for employee incentives and local advertising, as the two cannot be combined to meet the minimum advertising requirements. It also highlights the importance of obtaining written approval from Devon Creek for any advertising-related expenses that might be considered non-traditional or outside the scope of typical advertising activities.