Can Fly To Fit Franchise establish market advertising cooperatives?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.4 Market Cooperatives. Fly To Fit Franchise may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas.
If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative.
If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days.
Fly To Fit Franchise shall not require Franchisee to be a member of more than one Market Cooperative.
If Fly To Fit Franchise establishes a Market Cooperative:
- (a) Governance.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Fly To Fit Franchise.
Fly To Fit Franchise may require the Market Cooperative to adopt bylaws or regulations prepared by Fly To Fit Franchise.
Unless otherwise specified by Fly To Fit Franchise, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
Fly To Fit Franchise will be entitled to attend and participate in any meeting of a Market Cooperative.
Any Fly To Fit business owned by Fly To Fit Franchise in the Market Cooperative shall have the same voting rights as those owned by its franchisees.
Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement.
If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, Fly To Fit Franchise may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose.
Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to Fly To Fit Franchise's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval.
No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Fly To Fit Franchise pursuant to Section 9.1.
Fly To Fit Franchise may designate the national or regional advertising agencies used by the Market Cooperative.
- (d) Funding. The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% and not more than 5% of Gross Sales.
- (e) Enforcement. Only Fly To Fit Franchise will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
- (f) Termination. Fly To Fit Franchise may terminate any Market Cooperative. Any funds left in a Market Cooperative upon termination will be transferred to the Marketing Fund.
- 9.5 Required Spending. Franchisee shall spend at least 5% of Gross Sales each month on marketing the Business. Upon request of Fly To Fit Franchise, Franchisee shall furnish proof of its compliance with this Section. Fly To Fit Franchise has the sole discretion to determine what activities constitute "marketing" under this Section. Fly To Fit Franchise may, in its discretion, determine that if Franchisee contributes to a Market Cooperative, the amount of the contribution will be counted towards Franchisee's required spending under this Section.
- 9.6 Market Introduction Plan. Franchisee must develop a market introduction plan and obtain Fly To Fit Franchise's approval of the market introduction plan at least 30 days before the projected opening date of the Business.
Source: Item 22 — CONTRACTS (FDD page 44)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, Fly To Fit Franchise has the option to establish market advertising and promotional cooperative funds, referred to as "Market Cooperatives," in specific geographic areas. If a Market Cooperative exists in the franchisee's location when they start operating, they must immediately join. If a Market Cooperative is created during the franchise agreement, the franchisee has 30 days to become a member. Fly To Fit Franchise will not require franchisees to be part of more than one Market Cooperative.
Fly To Fit Franchise determines the structure, governance, and start date of each Market Cooperative and may require them to adopt specific bylaws or regulations. Unless Fly To Fit Franchise states otherwise, the activities are decided by a majority vote of the members. Fly To Fit Franchise can attend and participate in Market Cooperative meetings and has the same voting rights as if it were a franchisee. Each business owner gets one vote per business, but a franchisee in default cannot vote. If the members cannot agree on how to spend the Market Cooperative's money, Fly To Fit Franchise can take over the decision-making after giving the members 10 days' notice.
The purpose of each Market Cooperative is to manage regional advertising and marketing programs and create standardized promotional materials for members' local advertising, subject to Fly To Fit Franchise's approval. No advertising or promotional materials can be used without Fly To Fit Franchise's prior approval, and Fly To Fit Franchise can choose the advertising agencies used by the Market Cooperative. Members, including franchisees, will pay dues as determined by a majority vote of the Market Cooperative, with dues being between 1% and 5% of gross sales. Fly To Fit Franchise is the only party that can enforce the obligations of franchisees to contribute to the Market Cooperative. Fly To Fit Franchise can also terminate any Market Cooperative, and any remaining funds will be transferred to the Marketing Fund.
Fly To Fit Franchise requires franchisees to spend at least 5% of gross sales each month on marketing. Fly To Fit Franchise has the discretion to decide what counts as "marketing" and may credit contributions to a Market Cooperative toward this required spending. Franchisees must also develop a market introduction plan and get Fly To Fit Franchise's approval at least 30 days before opening. This comprehensive structure gives Fly To Fit Franchise significant control over marketing and advertising efforts, both at the individual franchise level and through Market Cooperatives.