Can a Kidokinetics regional advertising cooperative require contributions exceeding the local marketing requirement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor will have the right, in Franchisor's discretion, to designate any geographical area for purposes of establishing a regional advertising and promotional cooperative ("Cooperative"), and to determine whether a Cooperative is applicable to the Kidokinetics Business. If a Cooperative is established applicable to the Kidokinetics Business, Franchisee must participate in the Cooperative. Cooperative contributions will be credited towards the Local Marketing discussed in Section 12.2 above. Cooperative contributions will not exceed the Local Marketing Requirement unless a majority of the Cooperative votes to increase that requirement. The following provisions will apply to each Cooperative:
- 12.3.1. Each Cooperative will be organized and governed in a form and manner, and will commence operation on a date, approved in advance by Franchisor;
- 12.3.2. Each Cooperative will be organized for the exclusive purpose of administering regional advertising programs and developing, subject to Franchisor's approval, standardized advertising materials for use by the members in local advertising;
- 12.3.3. No promotional or advertising plans or materials may be used by a Cooperative or furnished to its members without Franchisor's prior approval. All such plans and materials must be submitted to Franchisor for prior review and approval;
- 12.3.4. The Cooperative's activities will be agreed upon by a majority vote of the member franchisees in the Cooperative. All Cooperative contributions will be credited against the Local Marketing Requirement. The Cooperative may, by the majority vote of its members, require a Cooperative contribution in excess of the Local Marketing requirement;
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, franchisees may be required to participate in a regional advertising and promotional cooperative if the franchisor designates one for their area. While cooperative contributions are typically credited towards the franchisee's Local Marketing Requirement, the cooperative can, with a majority vote of its members, require contributions exceeding this Local Marketing Requirement.
This means that as a Kidokinetics franchisee, you could potentially be obligated to contribute more to regional advertising than you would otherwise spend on local marketing. This decision isn't unilaterally imposed by the franchisor but is subject to a vote by fellow franchisees within the cooperative. However, if a majority votes to increase the contribution, you would be bound by that decision.
It's important for prospective Kidokinetics franchisees to understand the implications of cooperative advertising. While it can lead to more effective regional campaigns, it also carries the risk of higher advertising expenses than initially anticipated. Franchisees should engage with existing members of any cooperative in their region to understand the typical contribution levels and the types of advertising initiatives undertaken. They should also consider the potential impact on their overall marketing budget and profitability.