What is the relationship between the Advertising Contribution and Grand Opening Obligation for Moes Southwest Grill franchisees?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Your Advertising Contribution is in addition to your Local Marketing Obligation and your Grand Opening Obligation.
You must spend the Grand Opening Obligation (at least $25,000 and at least $35,000 if your Restaurant is the first to open in a Designated Market Area) in grand opening advertising promoting the opening of your Restaurant during the period beginning 90 days before (including advanced purchases during that period) you open the Restaurant and ending 90 days after you open the Restaurant.
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 Advertising Contribution and Grand Opening Obligation are separate and distinct financial responsibilities for franchisees. The Advertising Contribution is a monthly payment to the Ad Fund, currently set at 3% of Net Sales, but Moe's Southwest Grill retains the right to increase it to 4% with notice. This contribution supports the advertising and promotion of Moe's Southwest Grill restaurants, Proprietary Marks, and the System as a whole. The Grand Opening Obligation, on the other hand, is a one-time expenditure specifically for advertising the opening of a new restaurant. This obligation requires franchisees to spend at least $25,000, or at least $35,000 if the restaurant is the first to open in a Designated Market Area, on grand opening advertising.
The FDD clearly states that the Advertising Contribution is in addition to both the Local Marketing Obligation and the Grand Opening Obligation, meaning franchisees must budget for all three expenses. The Grand Opening Obligation must be spent within a defined period, starting 90 days before the restaurant opens and ending 90 days after. Moe's Southwest Grill maintains control over how these funds are spent, either by requiring franchisees to execute an approved plan or by collecting the funds to manage the advertising directly.
This distinction is important for prospective franchisees to understand because it highlights the ongoing advertising expenses (Advertising Contribution and Local Marketing Obligation) in addition to the initial investment required for the Grand Opening. Franchisees need to factor in these advertising costs when projecting their potential profitability and cash flow. The franchisor's ability to increase the Advertising Contribution also introduces a degree of financial uncertainty that franchisees should consider.
It is also important to note that Moe's Southwest Grill is not obligated to conduct any advertising, but may do so at its sole discretion. The franchisor also has sole authority over the Ad Fund and advertising programs. This means that franchisees have limited control over how their Advertising Contributions are spent and must rely on the franchisor's expertise and judgment in promoting the brand.