Can a Kidokinetics franchisee include research expenditures in their Local Marketing expenditures?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
ing upon Franchisee.
12.2. Local Marketing.
12.2.1. In addition to the ongoing advertising contributions set forth herein, Franchisee shall spend annually, throughout the term of this Agreement, the greater of $500 or 2% of Gross Sales per
month on a rolling 12-month average ("Local Marketing Requirement") on advertising for the Kidokinetics Business within the Territory ("Local Marketing"). Franchisee is not required to spend more than the Local Marketing Requirement, but there is no limit on the amount Franchisee may spend on local advertising. Franchisor does not impose an additional Local Marketing Requirement for a single franchisee operating up to four outlets if they are operated by the same legal entity and have adjacent territories. On or before the 1st day of February each year, Franchisee must submit to Franchisor a Local Marketing expenditure report accurately reflecting such expenditures for the preceding annual period. If that day is not a business day, then such report will be due on the next business day. The following costs and expenditures incurred by Franchisee will not be included in Franchisee's expenditures on Local Marketing for purposes of this Section, unless approved in advance by Franchisor in writing: (i) incentive programs for employees or agents of Franchisee; (ii) research expenditures; (iii) salaries and expenses of any of Franchisee's personnel to attend advertising meetings, workshops or other marketing activities; or (iv) charitable, political or other contributions or donations. We may require you to subscribe to the email marketing subscription program we designate, such as Constant Contact or other similar email marketing programs, at your sole cost and expense
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, franchisees generally cannot include research expenditures as part of their local marketing expenses unless they receive prior written approval from Kidokinetics.
Kidokinetics requires franchisees to spend a minimum amount on local marketing, set as the greater of $500 or 2% of gross sales on a rolling 12-month average. This local marketing requirement ensures franchisees actively promote their Kidokinetics business within their territory. Franchisees must submit an annual local marketing expenditure report to Kidokinetics by February 1st each year.
However, certain costs are explicitly excluded from counting towards this local marketing requirement unless Kidokinetics provides advance written approval. These exclusions include incentive programs for employees, salaries and expenses for personnel attending marketing activities, charitable contributions, and, notably, research expenditures. This policy ensures that local marketing funds are used for direct promotional activities rather than internal research or other non-approved expenses.
This restriction gives Kidokinetics control over how franchisees spend their local marketing funds, ensuring alignment with the brand's overall marketing strategy. A prospective franchisee should discuss with Kidokinetics what types of research expenditures, if any, might be approved to count towards the local marketing requirement.