What is the role of the Gold Star company in relation to franchisee advertising contributions and the Gold Star Chili Advertising Association, Inc.?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
As of January 1, 1990, a separate legal entity, Gold Star Chili Advertising Association, Inc. was organized for the purpose of providing advertising and marketing services for franchisees. Certain Company officers and employees serve as trustees of the advertising entity. The Company acts as a conduit in collecting advertising contributions from franchisees and disbursing the funds to the advertising entity. No income or expense is reflected on the Company's consolidated financial statements from this pass-through function. The Company makes a contribution to the advertising entity for the purposes of marketing research and product development.
Total advertising expense reflected in the Company's consolidated financial statements for 2024, 2023, and 2022 was $886,959, $921,454, and $996,584, respectively.
- 9.3 Brand Building Fund. FRANCHISEE shall participate in the COMPANY's marketing fund (the "Brand Building Fund") as the COMPANY shall direct. Subject to written instructions from the COMPANY, FRANCHISEE shall pay all or a portion of the Brand Building Fee directly to the Brand Building Fund. The Brand Building Fund is currently administered by the Gold Star Chili Advertising Association, an Ohio nonprofit corporation, of which the COMPANY is the only member.
- 9.3.1 The COMPANY, or its designee, shall oversee all Brand Building Fund advertising, with sole discretion to determine, approve or disapprove the creative concepts, materials and media used in such advertising, and the placement, type, scope and allocation of the Brand Building Fund advertising.
- 9.2.3 Subject to Section 9.3.8 below, FRANCHISEE shall spend no less than one percent (1%) of its Gross Sales on a monthly basis for local media and advertising (the "Local Marketing Expenditure") in addition to all other obligations set forth in this Article IX. FRANCHISEE shall report all such expenditures to the COMPANY upon request.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 FDD, Gold Star acts as an intermediary for advertising funds and also contributes to the Gold Star Chili Advertising Association, Inc. The Gold Star Chili Advertising Association, Inc. was established on January 1, 1990, to manage advertising and marketing for franchisees. Certain officers and employees of Gold Star serve as trustees of this advertising entity.
Gold Star collects advertising contributions from franchisees and then disburses these funds to the Gold Star Chili Advertising Association, Inc. Gold Star does not record any income or expenses related to this pass-through activity on its financial statements. However, Gold Star itself makes contributions to the advertising entity to support marketing research and product development.
Franchisees are also obligated to spend at least 1% of their gross sales monthly on local advertising, and they must report these expenditures to Gold Star upon request. Additionally, franchisees participate in Gold Star's Brand Building Fund, which is administered by the Gold Star Chili Advertising Association. Gold Star oversees all advertising related to the Brand Building Fund, having the sole discretion to make determinations regarding creative concepts, materials, media, and the placement of advertising.