Under what condition will Moes Southwest Grill not require participation in an Advertising Cooperative?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
stem generally in the manner that we determine to be most effective. We are not obligated to ensure that the expenditures from the Ad Fund are proportionate or equivalent to your contributions or that the Franchised Business will benefit directly or pro rata or in any amount from the placement of advertising. You will spend and/or contribute all advertising contributions, including the Advertising Contribution, provided for in this Agreement without reduction regardless of your perceived benefit to the Franchised Business or the amount of contribution by other franchisees operating Businesses or the default of these advertising obligations by any other franchisees.
10.4 Advertising Cooperatives.
- A. Participation. You will participate, if we require, in any local, regional, or national cooperative advertising group consisting of other Businesses (an "Advertising Cooperative") that we specify, when and if any of these groups are created. We will designate the particular Advertising Cooperative(s) in which you may be required to participate (which designations may be based on, without limitation, the particular Designated Market Area or the Area of Dominant Influence, as those terms are used in the advertising industry, where your Franchised Business is located). If we collect the entire Local Marketing Obligation, we will not require you to participate in an Advertising Cooperative. You will enter into any formal agreements with the other franchisees of the System and/or us, as the case may be, as is necessary or appropriate to accomplish the goals of this Section 10.4 and you must abide by the formal agreements and decisions that we authorize the Advertising Cooperative to make on advertising and marketing in the area covered by the Advertising Cooperative.
- B. Payments. Your payments to any Advertising Cooperative will be determined by you and those other franchisees and/or us, as the case may be, who are participants in the Advertising Cooperative, as stated in the by-laws of that Advertising Cooperative or membership, dues, participation, or other payment agreements of the Advertising Cooperative. Amounts paid to an Advertising Cooperative will be credited against your Local Marketing Obligation as specified in Section 10.1.E. (Local Marketing Obligation).
Source: Item 22 — Contracts (FDD page 92)
What This Means (2025 FDD)
According to the 2025 Moe's Southwest Grill Franchise Disclosure Document, franchisees are generally required to participate in advertising cooperatives if Moe's Southwest Grill establishes them. These cooperatives may be local, regional, or national and are designed to enhance the brand's marketing efforts. However, there is an exception to this requirement.
Moe's Southwest Grill will not require a franchisee to participate in an Advertising Cooperative if Moe's Southwest Grill collects the entire Local Marketing Obligation from the franchisee. This means that instead of the franchisee spending a portion of their revenue on local advertising, they pay that amount directly to Moe's Southwest Grill, and Moe's Southwest Grill then decides how to allocate those funds. The funds could be used to contribute to the Ad Fund, spend on advertising campaigns, contribute to the Advertising Cooperative in the franchisee's market, or spend on local advertising in the franchisee's market.
This arrangement provides Moe's Southwest Grill with greater control over local advertising expenditures and allows them to coordinate marketing efforts more effectively. However, the FDD stipulates that Moe's Southwest Grill is not obligated to ensure that the funds spent are proportionate or equivalent to the franchisee's contributions or that the franchised business will directly benefit from the advertising. This means that while the franchisee is relieved of the responsibility of managing local advertising, they also relinquish control over how their marketing funds are spent and may not see a direct return on their investment. Prospective franchisees should consider this trade-off when evaluating the terms of the franchise agreement.