Does Fitstop have the discretion to forgive unpaid Brand Development Fund contributions?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
We have full discretion to settle or forgive any accrued and unpaid Fund contributions owed by a franchisee. With any advertising funds paid, we have sole discretion as to how and where the money is spent to promote, enhance, or further the growth of the system, including, without limitation, promotional marketing, public relationships, and advertising expenses, hiring marketing, public relations and advertising agencies and internal personnel to assist in developing the brand name and average unit volumes, expenses associated with listings in telephone books, subsidies of premiere/marquis locations designed to garner media attention and promote the brand name, travel expenses in connection with promotions and marketing meetings, training, development of Proprietary Marks and trademarked materials, production of circulars, media, advertisements, coupons, and promotional materials (including point of purchase materials), market research, developing training tools designed to assist System franchisees, the cost of developing and maintaining an Internet website and other digital marketing tools, developing and deploying mystery shopper programs and for any other use we determine. Additionally, we can use the Fund to pay for expenses incurred in developing and maintaining non-franchise sales portion of our primary brand website. We are not required to spend any advertising funds in your specific area or territory. Materials provided by the Fund to all Franchisees may include video and audio tapes, mats, posters, banners, and miscellaneous point-of-sale items. You will receive one sample of each at no charge.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–35)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop has full discretion to settle or forgive any accrued and unpaid Brand Development Fund contributions owed by a franchisee. This means that Fitstop can choose to waive or reduce the amount a franchisee owes to the fund. The Brand Development Fund is used to cover costs related to advertising, marketing, and public relations to enhance the image of the Fitstop system. Currently, the Fund contribution is two percent (2%) of the Gross Revenue generated by the Franchised Business.
This discretion provides Fitstop with flexibility in managing its relationships with franchisees. It allows them to consider individual franchisee circumstances when dealing with unpaid contributions. For example, if a franchisee is facing financial hardship, Fitstop might choose to forgive some or all of the debt to help them stay in business. However, it's important to note that Fitstop is not obligated to forgive any debt, and the decision is entirely at their discretion.
For a prospective Fitstop franchisee, this clause offers a potential benefit. While franchisees should always aim to meet their financial obligations, the possibility of debt forgiveness provides a safety net in challenging situations. Franchisees should inquire about the specific circumstances under which Fitstop has previously exercised this discretion to better understand the potential for leniency. It is also important to note that other System franchisees' respective Fund contributions may be calculated at a different rate or on a different basis and, under limited circumstances, certain franchisees may not be required to pay Fund fees.