Does Flowerama have the right to reimburse itself from the Flowerama Marketing Fund for advertising-related costs?
Flowerama Franchise · 2024 FDDAnswer from 2024 FDD Document
If established, e have the right to reimburse ourselves out of the Flowerama Marketing Fund for the total costs (including indirect costs) of developing, producing and distributing any advertising materials and collecting the Advertising Fee (including attorneys', auditors' and accountants' fees and other expenses incurred in connection with collecting any Advertising Fee). (Franchise Agreement - Section 22 D).
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 38–52)
What This Means (2024 FDD)
According to Flowerama's 2024 Franchise Disclosure Document, if a Flowerama Marketing Fund is established, Flowerama has the right to reimburse itself from the fund. This reimbursement can cover the total costs, including indirect costs, associated with developing, producing, and distributing advertising materials. It also includes the costs of collecting the Advertising Fee, such as attorneys', auditors', and accountants' fees, and other related expenses. This provision is found within Section 22 D of the Franchise Agreement.
This means that a portion of the money franchisees contribute to the Flowerama Marketing Fund could be used to cover Flowerama's expenses related to advertising and collecting advertising fees. While this is a common practice in franchising, it's important for prospective franchisees to understand that the marketing fund isn't solely dedicated to direct advertising campaigns. A portion of the fund can be used for administrative purposes by Flowerama.
It is important to note that the FDD also states that the Flowerama Marketing Fund monies will be used by Flowerama for the purpose of advertising, promoting, and enhancing the total Flowerama image. The Flowerama Marketing Fund is intended to maximize general public recognition in all media, of the Flowerama Marks, patronage of Standard Flowerama Centers, and the availability of the products and services offered at Standard Flowerama Centers. No amount of the Flowerama Marketing Fund will be spent for advertising that is principally a solicitation for the sale of franchises.
Prospective franchisees should inquire about the typical expenses Flowerama anticipates reimbursing itself for, to better understand how much of the fund will be used for direct advertising versus administrative costs. Understanding these potential deductions can help a franchisee assess the true value and impact of the Flowerama Marketing Fund on their individual business.