What is the purpose of the Fly Fitness Brand Fund?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 13.3.1. Franchisor has established a national fund on behalf of the System for national advertising, marketing, and brand development (the "Brand Fund"). Franchisee is required to contribute to the Brand Fund two percent (2%) of the weekly Gross Revenue generated by the Franchised Business ("Brand Fund Contribution"). Payments will be made in the same manner and time as the Royalty Fees. If Franchisee fails to timely report Gross Revenue, then, in addition to a late fee and interest pursuant to Sections 6.2 and 6.3 hereof, Franchisor shall collect one hundred twenty percent (120%) of the last Brand Fund Contribution payable. Franchisor shall reconcile amounts when Gross Revenue are reported.
- 13.3.2. Franchisor shall direct the Brand Fund and shall have sole discretion to approve or disapprove the creative concepts, materials and media used in such programs and the placement and allocation thereof. Franchisee agrees and acknowledges that the Brand Fund is intended to maximize general public recognition and acceptance of
the Marks and enhance the collective success of all Franchised Businesses operating under the System.
13.3.3.
Franchisor may, but has no obligation to, contribute to the Brand Fund on the same basis as Franchisee with respect to Fly Fitness outlets operated by Franchisor or Franchisor's affiliates.
- 13.3.4.
Franchisor may use the Brand Fund to satisfy any and all costs of developing, preparing, producing, directing, administering, conducting, maintaining and disseminating advertising, marketing, promotional and public relations materials, programs, campaigns, sales and marketing seminars and training programs of every kind and nature, through media now existing or hereafter developed (including, without limitation, the cost of television, radio, magazine, social media, newspaper and electronic advertising campaigns; direct mail and outdoor billboard advertising; public relations activities; conducting marketing research, employing advertising agencies to assist therein; developing, enhancing and maintaining the Website; and personnel and other departmental costs for advertising that Franchisor internally administers or prepares).
- 13.3.5.
The Brand Fund will not be used to defray any of Franchisor's general operating expenses, except for reasonable administrative costs and overhead that Franchisor may incur in activities related to the administration and direction of the Brand Fund and such costs and expenses pursuant Section 13.3.4.
The Brand Fund and its earnings shall not otherwise inure to Franchisor's benefit except that any resulting technology and intellectual property shall be deemed the property of Franchisor.
- 13.3.6.
Franchisor will prepare an unaudited annual statement of the Brand Fund's operations and will make it available to Franchisee upon request.
In administering the Brand Fund, Franchisor undertakes no obligation to make expenditures for Franchisee that are equivalent or proportionate to Franchisee's contribution or to ensure that any particular franchisee benefits directly or pro rata from the production or placement of advertising.
- 13.3.7.
Although the Brand Fund is intended to be of perpetual duration, Franchisor may terminate it at any time and for any reason or no reason.
Franchisor will not terminate the Brand Fund, however, until all monies in the Brand Fund have been spent for advertising or promotional purposes or returned to contributors, without interest, on the basis of their respective contributions.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the Brand Fund is established for national advertising, marketing, and brand development on behalf of the Fly Fitness system. Franchisees are required to contribute 2% of their weekly gross revenue to the Brand Fund, payable in the same manner and timeframe as royalty fees. Failure to report gross revenue on time results in a penalty of 120% of the last Brand Fund contribution payable, in addition to late fees and interest. Fly Fitness will reconcile these amounts upon the reporting of gross revenue.
Fly Fitness has sole discretion over the Brand Fund, including approving creative concepts, materials, media, and their placement. The Brand Fund aims to maximize public recognition and acceptance of the Fly Fitness marks and enhance the collective success of all franchised businesses within the system. While Fly Fitness may contribute to the Brand Fund for its own outlets, it is not obligated to do so.
The Brand Fund can cover various costs related to advertising, marketing, promotional materials, public relations, campaigns, sales and marketing seminars, and training programs. This includes expenses for television, radio, magazine, social media, newspaper, and electronic advertising, as well as direct mail, outdoor billboard advertising, marketing research, advertising agencies, website development, and personnel costs for advertising administered internally by Fly Fitness. The Brand Fund will not be used for Fly Fitness's general operating expenses, except for reasonable administrative costs and overhead related to the fund's administration. Any technology and intellectual property resulting from the Brand Fund's activities will be owned by Fly Fitness.
Fly Fitness will provide an unaudited annual statement of the Brand Fund's operations to franchisees upon request. Franchisees should note that Fly Fitness is not obligated to ensure that expenditures from the Brand Fund are equivalent or proportionate to each franchisee's contribution, nor is it obligated to ensure that any particular franchisee benefits directly or pro rata from the advertising. Although the Brand Fund is intended to be perpetual, Fly Fitness reserves the right to terminate it at any time. However, upon termination, all remaining funds must be spent on advertising or promotional purposes or returned to the contributors based on their respective contributions, without interest.