What is the Brand Fund Contribution used for by Extreme Art Studio?
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 is used for system-wide marketing efforts to promote and build the Extreme Art brand. Franchisees are required to contribute 1% of their gross sales to this fund, with payments due at the same time as royalty payments, which is within five days after the end of each calendar month.
In addition to the standard Brand Fund Contribution, Extreme Art Studio franchisees may also be required to contribute to the Brand Fund if they fail to meet their local advertising expenditure requirements. Franchisees are required to spend $500 per month on local advertising. If a franchisee spends less than this amount, the difference must be paid to Extreme Art Studio, which will then contribute the funds to the Brand Fund or use them directly.
Prospective franchisees should understand that the Brand Fund is controlled by Extreme Art Studio, and while the contribution is intended to benefit all franchisees by enhancing brand recognition and attracting customers, the franchisee has limited control over how these funds are spent. It is common in franchising for a brand fund to be used for marketing and advertising purposes, but the specific allocation and effectiveness can vary. Franchisees may want to inquire about the franchisor's marketing strategy and how the Brand Fund has been used in the past to assess its potential impact.