Under what condition must an Extreme Art Studio advertising cooperative operate with governing documents?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
You may be required to participate in any established local or regional advertising cooperative for Extreme Art Businesses. The area of each local and regional advertising cooperative will be defined by us, based on our assessment of the area. Franchisees in each cooperative will contribute an amount to the cooperative of 0.5% to 1% of Gross Sales as determined by its members for each Extreme Art Studio Business that the franchisee owns that exists within the cooperative's area. Your contributions to a local and regional advertising cooperative will be credited to your Local Advertising Requirement. Each Extreme Art Studio Business we own that exists within the cooperative's area will contribute to the cooperative on the same basis as franchisees. Members of the cooperative will be responsible for administering the cooperative, including determining the amount of contributions from each member. We may require that each cooperative that exceeds five franchisee members must operate with governing documents. Each cooperative must prepare annual unaudited financial statements, and the statements will be provided for review to each member of such cooperative. We reserve the right to form, change, dissolve, or merge any advertising cooperative formed in the future. If we elect to form any cooperatives, or if any cooperative(s) already exist near your territory, you will be required to participate in compliance with the provisions of the Franchise Operations Manual, which we may periodically modify in our discretion.
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, if a local or regional advertising cooperative exceeds five franchisee members, Extreme Art Studio may require that the cooperative operate with governing documents. These cooperatives are responsible for administering themselves, including determining contribution amounts from each member, which range from 0.5% to 1% of Gross Sales. Each Extreme Art Studio Business that the franchisor owns within the cooperative's area will contribute on the same basis as franchisees.
Each cooperative must also prepare annual unaudited financial statements, which will be available for review by all members. This ensures transparency and accountability in how cooperative funds are managed and spent. The franchisor retains the right to form, change, dissolve, or merge any advertising cooperative in the future, providing flexibility in managing the advertising strategy for the Extreme Art Studio brand.
For a prospective franchisee, this means that participation in an advertising cooperative may be mandatory, and they will need to contribute a percentage of their gross sales to the cooperative. If the cooperative grows beyond five members, it will be governed by formal documents, adding a layer of structure and regulation to its operations. Franchisees should be prepared to review and understand the cooperative's financial statements and governing documents to ensure they are comfortable with its management and direction.