What is the required action for a Pearce Bespoke franchisee if their annual contributions to cooperative advertising programs are less than 5% of Gross Sales?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
To the extent Franchisee's annual contributions to cooperative advertising programs described in Section 6(A) above are less than five percent (5%) of the Gross Sales for the Pearce Bespoke Franchise, or if the Franchisee cannot participate in any regional cooperative advertising program because such a program has not been established in Franchisee's geographic area, Franchisee will then be obligated to conduct advertising and marketing activities in Franchisee's local geographic area; provided that Franchisee's local marketing activities will not reduce, eliminate, or otherwise impact Franchisee's obligations under Section 6(A) above. Franchisee's local marketing expenditures will include advertising, merchandising, sales promotion, and other forms of marketing at the local level.
Within thirty (30) days following the end of each calendar quarter, Franchisee will provide Franchisor with an accounting of the monies that it has spent for approved regional cooperative advertising and local marketing for the preceding calendar quarter. If Franchisee has failed to spend at least five percent (5%) of its Gross Sales for the calendar quarter for approved regional cooperative advertising or local marketing, Franchisee may be required to deposit with Franchisor the difference between what it should have spent for advertising and marketing during the calendar quarter and what it actually spent for advertising and marketing during the calendar quarter. Franchisor will spend such amount for any type of advertising or marketing that Franchisor deems appropriate for Franchisee's business, although Franchisor will use reasonable efforts to spend such amounts in Franchisee's local geographic area.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, if a franchisee's annual contributions to cooperative advertising programs are less than 5% of their Gross Sales, or if they cannot participate in a regional cooperative advertising program due to its absence in their area, they are obligated to conduct local advertising and marketing activities. These local marketing efforts should not reduce or eliminate the franchisee's obligations to contribute to cooperative advertising programs. Local marketing expenditures include advertising, merchandising, sales promotion, and other forms of marketing at the local level.
Within 30 days after each calendar quarter's end, the Pearce Bespoke franchisee must provide the franchisor with an accounting of the monies spent on approved regional cooperative advertising and local marketing for the previous quarter. If the franchisee has not spent at least 5% of their Gross Sales on approved regional cooperative advertising or local marketing, they may be required to deposit the difference with the franchisor.
The franchisor will then spend this deposited amount on advertising or marketing deemed appropriate for the franchisee's business, making reasonable efforts to spend it in the franchisee's local geographic area. This ensures that all franchisees contribute at least 5% of their gross sales towards advertising and marketing, whether through cooperative programs or local efforts, with the franchisor having the final say in how any shortfall is spent.