Does Hyper Kidz maintain a Brand Development Fund?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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Brand Development Fund (Franchise Agreement 12.1)
We have a brand development fund (referred to as the "Fund") for brand development, advertising, marketing and public relations programs that we believe are necessary or appropriate to promote Hyper Kidz Businesses. You must pay a non-refundable Brand Development Fee to the Fund in an amount equal to 2% of your Gross Sales. As stated in Item 8, we may contribute Allowances we receive from approved suppliers to the Fund. If we choose to do this, it does not reduce or eliminate your obligation to pay the Brand Development Fee. Hyper Kidz Businesses owned and operated by us or our affiliates will contribute to the Fund on the same basis as our franchisees.
We will direct all advertising and public relations programs financed by the Fund with sole discretion over the creative concepts, materials, and endorsements it uses, and the geographic, market, and media placement and allocation of it. The Fund may be used to pay the costs of developing marketing ideas and concepts; developing market research and merchandising programs; preparing marketing campaigns; developing promotional ideas and strategies; preparing collateral creative materials; preparing advertisements; preparing public relations campaigns; providing technical and professional advice in connection with any of the above; and placement of advertising. We have the right to reimburse ourselves out of the Fund for the total costs (including indirect costs such as salaries for our employees who devote time and effort to Fund related activities) of developing, producing and distributing any advertising materials and collecting the Brand Development Fee (including attorneys', auditors' and accountants' fees and other expenses incurred in connection with collecting any Brand Development Fee). The Fund and its earnings will not otherwise benefit us.
You must participate in all advertising and public relations programs conducted by the Fund. The Fund may furnish you with samples of certain marketing, advertising and promotional formats and other such materials without charge. We will not spend any contributions to the Fund on advertising that is a solicitation of new franchisees.
The Fund is held in an account separate from our general funds. We may spend in any fiscal year an amount greater or less than the aggregate contribution of all Hyper Kidz Businesses to the Fund in that year and the Fund may borrow from us or other lenders at standard commercial interest rates to cover deficits of the Fund or cause the Fund to invest any surplus for future use by the Fund. Any money remaining in the Fund at the end of any year will carry over to the next year. We will prepare within 120 after each fiscal year end, and furnish to you upon written request, an annual, unaudited statement of money collected and costs incurred by the Fund.
The Brand Fund and its earnings shall not otherwise inure to our benefit except that any resulting technology and intellectual property shall be deemed our property.
We may have the Fund incorporated or operated through an entity separate from us at any time we deem appropriate, and the successor entity will have all our rights and duties as described in this section and in the Franchise Agreement.
The Fund is intended to maximize recognition of the Marks and patronage of Hyper Kidz Businesses generally.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 24–33)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, Hyper Kidz maintains a Brand Development Fund. Franchisees are required to contribute to this fund by paying a non-refundable Brand Development Fee, set at 2% of their gross sales. Hyper Kidz may also contribute allowances received from approved suppliers to the fund; however, this does not reduce the franchisee's obligation to pay the 2% fee. Hyper Kidz businesses owned and operated by Hyper Kidz or its affiliates will contribute to the Fund on the same basis as franchisees. The fund is used for brand development, advertising, marketing, and public relations programs deemed necessary or appropriate to promote Hyper Kidz businesses.
Hyper Kidz has sole discretion over the advertising and public relations programs financed by the Fund, including creative concepts, materials, endorsements, and the geographic, market, and media placement and allocation. The fund may cover costs related to developing marketing ideas, market research, promotional strategies, collateral materials, advertisements, and public relations campaigns. Hyper Kidz can reimburse itself from the fund for the total costs, including indirect costs like employee salaries, associated with developing, producing, and distributing advertising materials and collecting the Brand Development Fee. The Brand Development Fund and its earnings will not otherwise benefit Hyper Kidz, except that any resulting technology and intellectual property shall be deemed Hyper Kidz's property.
Franchisees must participate in all advertising and public relations programs conducted by the Fund. Hyper Kidz may furnish samples of marketing, advertising, and promotional materials without charge. Contributions to the fund will not be used to solicit new franchisees. The Fund is held in a separate account from Hyper Kidz's general funds. Hyper Kidz may spend more or less than the aggregate contribution of all Hyper Kidz businesses in any fiscal year, and the Fund may borrow or invest money. Any money remaining in the Fund at the end of a year will carry over to the next year. Hyper Kidz will provide an annual, unaudited statement of money collected and costs incurred by the Fund within 120 days after each fiscal year end, upon written request.
For the fiscal year ending December 31, 2023, the Brand Development Fund's spending was allocated as follows: 10% to Local SEO, 20% to Social Media Marketing, 10% to Email Marketing, 10% to Content Marketing, 10% to Online Advertising, 10% to Public Relations, 10% to Sponsorships & Partnerships, 10% to Local Events, 5% to Customer Loyalty Programs, and 5% to Training and Support. Hyper Kidz retains the right to terminate the Fund at any time, provided that all money in the Fund is spent for advertising and promotional purposes. Hyper Kidz also has the right to reinstate the Fund at any time.