What is the purpose of the special account maintained for the Golden Krust Caribbean Restaurant advertising fund?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
rtising council but we reserve the right, at any time, to create one in the future.
You will be required to pay to us a weekly advertising fee equal to one-and-one-half percent (1.5%) of the Gross Sales of the Restaurant. This advertising fee is paid with the weekly royalty payment, but will be segregated by us in a special account maintained solely for the advertising fund.
We will direct all programs financed by the Advertising Fund, with sole discretion over the creative concepts, materials and endorsements used and the geographic, market and media placement and allocation of the programs. The Advertising Fund may be used to pay the costs of preparing and producing video, audio and written advertising materials; administering regional and multi-regional advertising programs, including, without limitation, social media and electronic media advertising, purchasing direct mail and other media advertising and employing advertising, promotion and marketing agencies to provide assistance; and supporting public relations, market research and other advertising, promotion and marketing activities. The Advertising Fund periodically will furnish you with samples of advertising, marketing and promotional formats and materials at no cost. Multiple copies of such materials will be furnished to you at our direct cost of producing them, plus any related shipping, handling and storage charges. We do not collect the same amount as an Advertising Fee from all Golden Krust franchisees, but reserve the right to do so. We may reduce or waive (and we have reduced or waived) the advertising fee in certain instances and for certain franchisees, including, but not limited to franchisees who are shareholders or employees (along with their children and/or heirs) of the franchisor or its affiliates. There are franchisees who pay a lower or no advertising fee.
The Advertising Fund will be accounted for separately from our other funds and will not be used to defray our general operating expenses, except for such reasonable salaries, administrative costs, travel expenses and overhead as we incur in activities related to the administration of the Advertising Fund and its programs, including, without limitation, conducting market research, preparing advertising, promotion, and marketing materials and collecting and accounting for contributions to the Advertising Fund. We may spend, on behalf of the Advertising Fund, in any fiscal year an amount greater or less than the aggregate contribution to the Advertising Fund in that year, and the Advertising Fund may borrow from us or others to cover deficits or invest any surplus for future use. All interest earned on monies contributed to the Advertising Fund will be used to pay advertising costs before other assets of the Advertising Fund are expended. We will prepare an unaudited annual statement of monies collected and costs incurred by the Advertising Fund and furnish it to you upon written request. We have the right to cause the Advertising Fund to be incorporated or operated through a separate entity at such time as it deems appropriate, and the successor entity will have all of the rights and duties described here.
In 2023, the monies from the Advertising Fund were spent as follows: 45%for digital marketing and 55% for traditional marketing, including radio, design, and production. The Advertising Fund is not audited.
We have no obligation to ensure that expenditures by the Advertising Fund in or affecting any geographic area are proportionate or equivalent to the contributions to the Advertising Fund by franchisees operating in that geographic area or that any of our franchisees will benefit directly or in proportion to its contribution to the Advertising Fund from the development of advertising and marketing materials or the placement of advertising. No funds from the Advertising Fund are used to directly solicit new franchise sales; however we may use such funds for our websites which include franchise sales pages.
We do not have any advertising cooperatives.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, OPERATIONS MANUAL, WEBSITE, AND TRAINING (FDD pages 18–23)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, franchisees are required to pay a weekly advertising fee equal to 1.5% of their restaurant's gross sales. This fee is paid along with the weekly royalty payment. Golden Krust Caribbean Restaurant segregates these advertising fees into a special account that is maintained solely for the advertising fund.
The advertising fund is used to finance various advertising programs, with Golden Krust Caribbean Restaurant having sole discretion over the creative concepts, materials, endorsements, and the placement and allocation of these programs. The fund may cover costs related to preparing and producing advertising materials (video, audio, written), administering regional and multi-regional advertising programs (including social and electronic media), purchasing direct mail and other media advertising, employing advertising agencies, and supporting public relations and market research. In 2023, 45% of the advertising fund was spent on digital marketing and 55% was spent on traditional marketing, including radio, design, and production.
The advertising fund will be accounted for separately from Golden Krust Caribbean Restaurant's other funds and will not be used to defray general operating expenses, except for reasonable salaries, administrative costs, travel expenses, and overhead incurred in administering the fund and its programs. This includes conducting market research, preparing advertising materials, and collecting and accounting for contributions. Any interest earned on the advertising fund will be used to pay advertising costs before other assets of the fund are expended. Golden Krust Caribbean Restaurant will prepare an unaudited annual statement of monies collected and costs incurred by the advertising fund, which is available to franchisees upon written request.
Golden Krust Caribbean Restaurant does not guarantee that expenditures from the advertising fund will be proportionate to contributions from franchisees in any specific geographic area, nor that any franchisee will directly benefit in proportion to their contribution. The funds are not used to directly solicit new franchise sales, although they may be used for franchise sales pages on the company's websites. Golden Krust Caribbean Restaurant reserves the right to reduce or suspend contributions to and operations of the advertising fund, and if the fund is terminated, unspent monies will be spent or distributed to franchisees in proportion to their contributions during the preceding twelve-month period.