Is Extreme Art Studio obligated to spend any amount on advertising in a franchisee's geographical area?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
gencies to create them. We have complete discretion on how the Brand Fund will be utilized. We may use the Brand Fund for local, regional, or national marketing, advertising, sales promotion and promotional materials, public and consumer relations, website development and search engine optimization, the development of technology for the System, and any other purpose to promote the Extreme Art brand. We may reimburse ourselves, our authorized representatives, or our affiliates from the Brand Fund for administrative costs, independent audits, reasonable accounting, bookkeeping, reporting and legal expenses, taxes, and all other direct or indirect expenses associated with the programs funded by the Brand Fund. We do not guarantee that advertising expenditures from the Brand Fund will benefit you or any other franchisee directly, on a pro rata basis, or at all. We are not obligated to spend any amount on advertising in the geographical area where you are or will be located. We will not use the Brand Fund Contributions for advertising that is principally a solicitation for the sale of Franchises, but we reserve the right to include a notation in any advertisement indicating "Franchises Available," or similar phrasing, or include information regarding acquiring a Franchise on or as a part of materials and items produced by or for the Brand Fund.
We assume no fiduciary duty to you or other direct or indirect liability or obligation to collect amounts due to the Brand Fund or to maintain, direct, or administer the Brand Fund. Any unused funds in any calendar year will be applied to the following year's funds, and we reserve the right to contribute or loan additional funds to the Brand Fund on any terms we deem reasonable.
The Brand Fund is not audited. We will provide an annual unaudited accounting for the Brand Fund that shows how the Brand Fund proceeds have been spent for the previous year upon written request. We did not collect any Brand Fund Contributions during our last fiscal year, ended December 31, 2023.
Local Advertising
In addition to any Brand Fund Contributions, each Extreme Art Studio Business you operate must spend $500 per month per Extreme Art Studio Business to advertise and promote your Extreme Art Studio Business (including the costs of online advertising) ("Local Advertising Requirement
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 27–37)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, Extreme Art Studio is not obligated to spend any amount on advertising in a franchisee's geographical area. The FDD states that Extreme Art Studio has complete discretion on how the Brand Fund will be utilized and that they do not guarantee that advertising expenditures from the Brand Fund will benefit any franchisee directly or at all.
However, franchisees are required to contribute to the Brand Fund. Franchisees must pay one percent (1%) of their gross sales to the Brand Fund. These contributions are in addition to all other advertising requirements. The Brand Fund is used for marketing, developing, and promoting the Extreme Art Studio system, marks, and businesses.
In addition to the Brand Fund contribution, franchisees must spend $500 per month on local advertising to promote their Extreme Art Studio Business. If a franchisee fails to meet this local advertising requirement, they will be required to pay the difference to Extreme Art Studio or the Brand Fund. Franchisees may also be required to participate in local or regional advertising cooperatives, contributing 0.5% to 1% of Gross Sales to the cooperative.