What is the maximum amount I will have to contribute to a Devon Creek regional cooperative?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
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If we establish a regional advertising fund or cooperative, you must contribute amounts we require. Your contributions to a regional advertising fund or cooperative will be in addition to your required contributions to the Brand Fund; however, contributions made by you to a regional advertising fund or cooperative will be credited against up to one-half of your required expenditures for local advertising. Fees for the cooperative are not to exceed one-half of the Local Advertising requirement or your pro-rata share of actual cooperative advertising costs, whichever is greater.
Advertising Council (Franchise Agreement, Section 9.5)
We do not have an advertising council composed of franchisees that advises us on advertising policies. The Franchise Agreement gives us the right, in our discretion, to create a franchisee advisory council to communicate ideas, including proposed advertising policies.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 24–32)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, if Devon Creek establishes a regional advertising fund or cooperative, franchisees must contribute the amounts that Devon Creek requires. These contributions are in addition to the required contributions to the Brand Fund. However, contributions to the regional advertising fund or cooperative will be credited against up to one-half of the franchisee's required expenditures for local advertising.
The FDD states that fees for the cooperative are not to exceed one-half of the Local Advertising requirement or the franchisee's pro-rata share of actual cooperative advertising costs, whichever is greater.
Currently, franchisees are required to spend $1,000 per month on local advertising until they reach $250,000 in annual revenue. After that, they must spend the greater of 3% of monthly Gross Revenue or $1,000 per month on local advertising. Therefore, the maximum contribution to a regional cooperative would depend on whether the franchisee's gross revenue exceeds $250,000 annually, and on the pro-rata share of actual cooperative advertising costs. If the franchisee's gross revenue exceeds $250,000 annually, the maximum contribution to the regional cooperative could be one-half of 3% of monthly gross revenue, or the pro-rata share of actual cooperative advertising costs, whichever is greater.
It is important to note that Devon Creek has the discretion to increase the minimum local advertising expenditure, which would consequently affect the maximum contribution to a regional cooperative. Prospective franchisees should clarify with Devon Creek how the pro-rata share of actual cooperative advertising costs is calculated and what factors could influence changes to the local advertising expenditure or the cooperative fees.