How does Moes Southwest Grill manage the Ad Fund, as referenced in Item 11?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
vertising**
Our Advertising. We are not obligated to conduct any advertising. We may periodically formulate, develop, produce, and conduct, at our sole discretion, advertising or promotional programs in such form and medium as we determine to be most effective. We may make available to you for you to purchase approved advertising and promotional materials, including signs, posters, collaterals, etc. that we have prepared.
Ad Fund. We will allocate your Advertising Contributions to a fund for the advertising and promotion of the Restaurants, the Proprietary Marks, and the System (the "Ad Fund"). Currently, you must make a monthly Advertising Contribution to the Ad Fund in the amount of 3% of Net Sales. We may, however, increase the Advertising Contribution up to 4% of Net Sales at any time by notice to franchisees. Your Advertising Contribution is in addition to your Local Marketing Obligation and your Grand Opening Obligation.
We currently do not, and are not required to, maintain the Ad Fund, Advertising Contribution you paid, or income earned from contributions to the Ad Fund in a separate account from our other money. Our Restaurants will contribute to the Ad Fund in the same manner and in the same amounts as similarly-situated franchised Restaurants. Our other franchisees may not be required to contribute to the Ad Fund, may be required to contribute to the Ad Fund at a different rate than you, or may be required to contribute to a different advertising fund.
We or an affiliate will administer the Ad Fund. We have sole authority to direct all advertising programs and promotions and uses of the Ad Fund, with sole control over the creative concepts, materials, and media used in the programs, and the placement and allocation of advertising. We reserve the right to use any media, create any programs, and allocate advertising and promotional expenditures to any regions or locales we deem appropriate.
We may use the Ad Fund to meet the costs of administering, preparing, and conducting national, local, or regional advertising, promotional, or brand building programs of any kind, including the cost of (i) preparing and conducting television, radio, magazine, newspaper, and digital advertising campaigns and other public relations activities (including, but not limited to, for purposes of brand reputation management), (ii) employing public relations firms and advertising agencies to assist in these activities, and (iii) conducting other activities that are directly or indirectly designed to promote the System, its franchisees, and/or increase System sales, such as limited-time menu offerings, crew incentives, franchisee incentive and/or promotional programs, customized materials (e.g., cups), up-sell programs, guest response programs, manager/employee recognition programs, quality assurance and food safety programs, mystery shop and shopper programs, brand websites and ordering platforms, brand applications, social media account administration and promotion, and in-store equipment and technologies related to such marketing programs. We may use the Ad Fund to compensate us for the reasonable administrative costs and overhead we incur in activities related to advertising and promotional programs, including new product development; market research; preparing advertising and promotional materials; Digital Marketing (as defined below); working with public relations firms, advertising agencies, advertising placement services, and creative talent; reimbursing franchisee advisory council meeting expenses; developing and maintaining, and paying third parties for the development and maintenance of, internet sites, applications, and other equipment and technologies related to marketing programs.
Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 53–68)
What This Means (2025 FDD)
According to Moe's Southwest Grill's 2025 Franchise Disclosure Document, the Ad Fund is used for advertising and promotion of restaurants, proprietary marks, and the system. Franchisees are currently required to contribute 3% of Net Sales monthly to the Ad Fund, but Moe's Southwest Grill can increase this to 4% with notice. These contributions are in addition to local marketing and grand opening obligations. Moe's Southwest Grill does not keep the Ad Fund in a separate account. Restaurants owned by Moe's Southwest Grill contribute to the fund in the same manner as franchised locations. However, other franchisees may have different contribution rates or contribute to a different advertising fund.
Moe's Southwest Grill, or an affiliate, administers the Ad Fund and has sole authority over advertising programs, creative content, and media placement. They can use any media, create any programs, and allocate advertising expenditures as they see fit. During Fiscal Year 2024, the Ad Fund expenditures were allocated as follows: 57% on media placement, 20% on production and agency fees, 4% on guest response programs and menu innovation projects, 18% on brand and category marketing expenses (including salaries of marketing personnel), and 1% on administrative expenses.
Moe's Southwest Grill is not required to conduct an independent audit of the Ad Fund but will provide an annual summary of expenditures upon request. Any remaining funds at the end of the fiscal year will carry over to the next year. Moe's Southwest Grill may terminate the Ad Fund after all contributions have been spent. The brand does not have an advertising council composed of franchisees involved in decision-making, but there is a marketing subcommittee within the Franchise Advisory Council that provides suggestions on advertising issues. Franchisees are required to participate in any advertising cooperatives that Moe's Southwest Grill specifies.