May Endless Summer Sweets establish market advertising cooperatives?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.4 Market Cooperatives. Franchisor 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 thirty (30) days. Franchisor shall not require Franchisee to be a member of more than one Market Cooperative. If Franchisor 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 Franchisor.
Franchisor may require the Market Cooperative to adopt bylaws or regulations prepared by Franchisor.
Unless otherwise specified by Franchisor, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
Franchisor will be entitled to attend and participate in any meeting of a Market Cooperative.
Any Franchisor business owned by Franchisor 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, Franchisor 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 standardized promotional materials for use by the members in local advertising and promotions, all of which are subject to Franchisor's approval.
- (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 Franchisor pursuant to Section 9.1 of this Agreement.
Franchisor 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 Franchisor 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.
Franchisor may terminate any Market Cooperative.
Any funds left in a Market Cooperative upon termination will be transferred to the Marketing Fund.
- 9.5 Required Spending. Franchisee shall spend at least three percent (3%) of Gross Sales each month on marketing the Business.
Upon request of Franchisor, Franchisee shall furnish proof of its compliance with this Section.
Franchisor has the sole discretion to determine what activities constitute "marketing" under this Section.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, Endless Summer Sweets may establish market advertising and promotional cooperative funds, referred to as "Market Cooperative," in any geographical areas. If a Market Cooperative exists for the area encompassing a franchisee's location when they begin operations, the franchisee must immediately join. If a Market Cooperative is established during the term of the Franchise Agreement, the franchisee must join within thirty days. Endless Summer Sweets will not require a franchisee to be a member of more than one Market Cooperative. Each Market Cooperative will be organized and governed in a form and manner and shall commence operations on a date determined by Endless Summer Sweets.
The activities of each Market Cooperative are decided by a majority vote of its members, unless Endless Summer Sweets specifies otherwise. Endless Summer Sweets is entitled to attend and participate in any Market Cooperative meeting, and any Endless Summer Sweets business owned by Endless Summer Sweets 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 a franchisee is in default under their franchise agreement. If the members cannot agree on how to spend the Market Cooperative's money, Endless Summer Sweets may take over the decision-making after giving the members 10 days' notice.
Each Market Cooperative must focus on regional advertising and marketing programs and developing standardized promotional materials for members' local advertising and promotions, all subject to Endless Summer Sweets' approval. No advertising or promotional plans or materials can be used by a Market Cooperative or given to its members without Endless Summer Sweets' prior approval. Endless Summer Sweets may 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, including franchisees, but the dues must be between 1% and 5% of Gross Sales. Only Endless Summer Sweets can enforce the obligations of franchisees to contribute to the Market Cooperative. Endless Summer Sweets may terminate any Market Cooperative, and any remaining funds will be transferred to the Marketing Fund.
In addition to Market Cooperative dues, Endless Summer Sweets franchisees must spend at least 3% of Gross Sales each month on marketing the Business. Franchisees must provide proof of compliance upon Endless Summer Sweets' request. Endless Summer Sweets has the sole discretion to determine what activities constitute "marketing" under this requirement. This means that a franchisee could be required to contribute to both a market cooperative and spend additional funds on marketing, potentially increasing their overall marketing expenses.