Is the Punch King Fitness franchisee required to contribute to a Cooperative?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
d that Franchisee spends at least $100 per month every month for Local Advertising to generate public interest and awareness of the Franchised Business and to adequately penetrate the market for Franchisee's products and services within Franchisee's trading area. Franchisee shall submit proof of local advertising spending to franchisor by the 10th day following the end of each fiscal quarter.
J. Regional Advertising Cooperatives
Franchisor may, at its discretion, designate any geographical area in which at least two Punch King Fitness Franchised Businesses are located for the purpose of establishing a local or regional marketing and advertising cooperative (Cooperative). Franchisee shall take appropriate steps to establish and participate in a Cooperative if required to do so by Franchisor. If a Cooperative for the geographical area in which the Franchised Business is located has already been established when Franchisee opens the Franchised Business, then Franchisee shall immediately become a member of the Cooperative under the terms of its governing documents. If a Cooperative for the geographical area in which the Franchised Business is located is established during the term of this Agreement, Franchisee shall immediately become a member of the Cooperative and take all steps necessary to become a member. In no event shall Franchisee be required to be a member of more than one Cooperative for the Franchised Business established under this Agreement. The following provisions apply to each Cooperative:
1. Each Cooperative will be organized and governed in a form and manner prescribed or approved by Franchisor in writing and will commence operations on a date specified by Franchisor. Any disputes arising between Franchisee on one side and other franchisees in the Cooperative or the Cooperative on the other side, will be resolved in accordance with the rules and procedures in the Cooperative's governing documents. Each member of a Cooperative, whether a Franchisor, an affiliate of Franchisor, or a
franchisee of Franchisor, will be entitled to one vote for each Franchised Business operated by the member in the geographical area for which the Cooperative is established.
- 2. Franchisor, in its sole discretion, shall establish the geographical area covered by each Cooperative by determining the common coverage areas of advertising media relevant to the particular geographic market, the Metropolitan or Metropolitan Statistical Area, industry practices, or Franchisor's advertising policies.
- 3. Each Cooperative will be organized for the exclusive purpose of administering local or regional advertising programs and developing, subject to Franchisor's approval, standardized promotional materials for use by the members in local or regional advertising and promotion.
- 4. No advertising or promotional plans or materials may be used by a Cooperative or furnished to its members without the prior approval of Franchisor pursuant to the procedures in this Section of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, franchisees may be required to participate in a regional advertising cooperative. Punch King Fitness has the discretion to designate geographical areas with at least two Punch King Fitness locations to establish a cooperative. If Punch King Fitness requires participation, the franchisee must take the necessary steps to join. If a cooperative already exists when the franchisee opens their business, they must immediately become a member under the cooperative's governing documents. Franchisees will not be required to be a member of more than one cooperative.
Each cooperative will be organized and governed as prescribed or approved by Punch King Fitness and will begin operations on a date specified by Punch King Fitness. Disputes between a franchisee and other franchisees in the cooperative, or the cooperative itself, will be resolved according to the cooperative's governing documents. Each member, including Punch King Fitness, its affiliates, and franchisees, gets one vote for each Punch King Fitness location they operate in the cooperative's geographical area.
For each Punch King Fitness location operated by Punch King Fitness or its affiliates in an area with a cooperative, Punch King Fitness will contribute to the cooperative on the same basis as other comparable franchisees in that cooperative. These cooperatives are intended to be perpetual, but Punch King Fitness reserves the right to modify, merge, or dissolve any cooperative. If a cooperative is dissolved, any unspent funds will be used for advertising or promotional purposes for the Punch King Fitness system. It is important to note that other Punch King Fitness franchisees in the same geographical area may have different franchise agreements and may not be required to participate in cooperatives.