Does the Brand Fund Contribution benefit individual Extreme Art Studio franchisees directly?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
OTHER FEES**
| Type of Fee(1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty(2) | The greater of 8% of Gross Sales ("Royalty") or $500 per month ("Minimum Royalty") | Within five days after the end of the calendar month | The Royalty is based on "Gross Sales" during the previous month. Gross Sales are defined in Note 2. You must pay your Royalty via electronic funds transfer ("EFT"), or such other manner we may prescribe. The Minimum Royalty begins six months after you open your first Extreme Art Studio Business and immediately after you open additional Extreme Art Studio Businesses. |
| Brand Fund Contribution(2) | 1% of Gross Sales | Same as Royalty | This contribution will be used for a system-wide "Brand Fund" for our use in promoting and building the Extreme Art brand. |
| Local Advertising Payment | The difference between the amount you spent on local advertising each month and your required local advertising expenditure ($500 per month per Extreme Art Studio Business) | Payable after receipt of invoice | If you fail to meet your required local advertising requirement on local advertising, you must pay us the difference between the amount you spent and the required advertising expenditure, which will be contributed to the Brand Fund |
Source: Item 6 — OTHER FEES (FDD pages 13–18)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the Brand Fund contribution, set at 1% of Gross Sales, is used for system-wide promotion and building the Extreme Art brand. This contribution is not directly returned to individual franchisees but is intended to benefit all franchisees by enhancing brand recognition and attracting customers to the Extreme Art Studio system as a whole. The Brand Fund contribution is due at the same time as the Royalty payments.
In addition to the Brand Fund, Extreme Art Studio franchisees may also participate in local or regional advertising cooperatives, if established. These cooperatives, funded by members contributing between 0.5% and 1% of Gross Sales, allow for more direct control over local advertising efforts. Each Extreme Art franchisee and company-owned studio within the cooperative's area has one vote for each studio operated in the designated market, ensuring that franchisees have a say in how these funds are spent locally.
If an Extreme Art Studio franchisee fails to meet their required local advertising expenditure of $500 per month, they must pay the difference between what they spent and the required amount. This difference is then contributed to the Brand Fund or directly to Extreme Art Studio. This policy ensures that all franchisees contribute to marketing efforts, whether through their own local advertising or through contributions to the broader Brand Fund.