What is the Brand Fund Contribution for an Extreme Art Studio franchise defined as?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.3.1 Recognizing the value of advertising and marketing to the goodwill and public image of Extreme Art Studio Businesses, we have established a national advertising and marketing fund ("Brand Fund") for marketing, developing and promoting the System, the Marks and Extreme Art Studio Businesses. You agree to contribute to the Brand Fund in an amount equal to one percent (1%) of your Gross Sales, due and payable in the same manner as the Royalty ("Brand Fund Contribution"). Extreme Art Studio Businesses owned by us or our affiliates may, but are not required to, contribute to the Brand Fund on the same basis as our franchisees.
- 9.3.2 We will direct all programs that the Brand Fund finances, with sole control over the creative concepts, materials and endorsements used, and their geographic, market and media placement and allocation. The Brand Fund may pay for preparing and producing video, audio and written materials and electronic media; developing, implementing and maintaining our System
Website (as defined in Section 9.5 below) or related websites that promote Extreme Art Studio Businesses and/or related strategies; administering regional and multi-regional marketing and advertising programs, including, without limitation, purchasing trade journal, direct mail, and other media advertising; using advertising, promotion and marketing agencies and other advisors to provide assistance; administering online advertising and marketing campaigns (including search engine, social media, email, and display ad campaigns); developing and maintaining application software designed to run on computers and similar devices, including tablets, smartphones and other mobile devices, as well as any evolutions or "next generations" of any such devices; to implement a loyalty program or other marketing programs designed to encourage the use of Extreme Art Studio Businesses; and supporting public relations, market research, and other advertising, promotion and marketing activities.
- 9.3.3 The Brand Fund periodically will give you samples of advertising, marketing, and promotional formats and materials at no cost that we may develop.
The Brand Fund will sell you multiple copies of these materials at its direct cost of producing them, plus any related shipping, handling, and storage charges.
- 9.3.4 We will account for the Brand Fund separately from our other funds.
We may use the Brand Fund to pay the reasonable salaries and benefits of personnel who manage and administer the Brand Fund, the Brand Fund's other administrative costs, travel expenses of personnel while they are on Brand Fund business, meeting costs, overhead relating to Brand Fund business, and other expenses that we incur in activities reasonably related to administering or directing the Brand Fund and its programs, including, without limitation, conducting market research; public relations; preparing advertising, promotion, and marketing materials; and collecting and accounting for Brand Fund Contributions.
- 9.3.5 The Brand Fund is not our asset.
Although the Brand Fund is not a trust, we will hold all Brand Fund Contributions for the benefit of the contributors and use contributions only for the purposes described in this Section.
We do not have any fiduciary obligation for administering the Brand Fund or for any other reason.
The Brand Fund may spend in any fiscal year more or less than the total Brand Fund Contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use.
We will use all interest earned on Brand Fund Contributions to pay costs before using the Brand Fund's other assets.
- 9.3.6 We will prepare an annual, unaudited statement of Brand Fund collections and expenses, and give you the statement upon written request.
The Brand Fund is not audited.
We will provide an annual accounting for the Brand Fund that shows how the Brand Fund proceeds have been spent for the previous year upon written request.
We may incorporate the Brand Fund or operate it through a separate entity whenever we deem appropriate.
The successor entity will have all of the rights and duties specified in this Section 9.3.
- 9.3.7 The purpose of the Brand Fund is to maximize recognition of the Marks, patronage of Extreme Art Studio Businesses, and the Extreme Art Studio brand generally.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, franchisees must contribute to the Brand Fund. The Brand Fund Contribution is defined as one percent (1%) of the franchise's Gross Sales. This contribution is due and payable in the same manner as the Royalty fees.
The Brand Fund is used for marketing, developing, and promoting the Extreme Art Studio system, trademarks, and businesses. Extreme Art Studio has sole control over the creative concepts, materials, and placement of advertising financed by the Brand Fund. The fund may be used for various marketing activities, including preparing materials, maintaining the System Website, administering advertising programs, using marketing agencies, and supporting public relations and market research.
Extreme Art Studio will provide franchisees with samples of advertising materials at no cost and will sell multiple copies of these materials at its direct cost of production, plus shipping and handling. The Brand Fund is accounted for separately from Extreme Art Studio's other funds and is not considered an asset of the company. While not a trust, the contributions are held for the benefit of the contributors and used only for the specified purposes. An annual, unaudited statement of Brand Fund collections and expenses is available to franchisees upon written request.
Extreme Art Studio may use the Brand Fund to pay salaries and benefits of personnel managing the fund, administrative costs, travel expenses, meeting costs, overhead, and other related expenses. The Brand Fund can spend more or less than the total contributions in a given year, borrow funds to cover deficits, or invest any surplus for future use. Interest earned on Brand Fund Contributions will be used to pay costs before using other assets of the Brand Fund. Extreme Art Studio also has the right to defer, reduce, or suspend Brand Fund Contributions with 30 days' notice and may terminate the Brand Fund, distributing unspent monies to franchise owners and themselves in proportion to their contributions over the preceding 12 months.