If Stretch Zone establishes a Regional Advertising Cooperative in a DMA, what is the franchisee's obligation?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree that we have the right to establish a Regional Advertising Cooperative in any DMA. Upon our request, you will immediately become a member of the Regional Advertising Cooperative for the DMA that includes your Exclusive Territory. Your Franchise Business does not have to be a
member of more than 1 Regional Advertising Cooperative. All Company-Owned Units within your DMA must also become members of the Regional Advertising Cooperative. Our form of Regional Advertising Cooperative Agreement as of the date of this Disclosure Document is attached as Exhibit P.
Purposes of Regional Advertising Cooperative. We will organize the Regional Advertising Cooperative for the exclusive purposes of administering advertising programs and developing standardized promotional materials for use by its members. The Regional Advertising Cooperative may adopt its own rules and procedures, but we must approve the rules or procedures. The rules and procedures must not restrict or expand your rights or obligations under the Franchise Agreement. Except as otherwise contained in the Franchise Agreement, and subject to our approval, any lawful action of the Regional Advertising Cooperative at a meeting attended by 67% of the members, including assessments for Local Advertising, binds you if approved by 67% of the members present.
Members' Contributions to Cooperative. The Regional Advertising Cooperative has the right to require each of its members to contribute to the Regional Advertising Cooperative the same amount, but not to exceed 2% of that member's monthly Gross Revenues. We credit this amount against your obligation for Local Advertising as provided by Subsection 7.2(c) of the Franchise Agreement. Each member will submit to the Regional Advertising Cooperative, no later than the 10th day of each month for the preceding calendar month, its contribution together with all other statements or reports the Regional Advertising Cooperative or we require.
Quarterly Reports. The Cooperative will prepare quarterly unaudited reports of its advertising and marketing expenditures. The reports will be sent by the Cooperative to its members and to us.
Impasses. If an impasse occurs based on its members' inability or failure to resolve within 45 days any issue affecting the establishment or effective functioning of the Regional Advertising Cooperative, the issue, upon request of a member of the Regional Advertising Cooperative, will be submitted to us for consideration. Our resolution of the issue is final and binding on all members of the Regional Advertising Cooperative.
Changes, Dissolution or Merger of Cooperatives. We have the right to form, change, dissolve or merge any Cooperative.
Source: Item 11 — ITEM -11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 36–44)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, if Stretch Zone establishes a Regional Advertising Cooperative in a Designated Market Area (DMA), franchisees must immediately become members of the cooperative for the DMA that includes their exclusive territory. Franchisees are not required to be members of more than one Regional Advertising Cooperative. Company-owned units within the DMA must also become members. The purpose of the Regional Advertising Cooperative is to administer advertising programs and develop standardized promotional materials for its members. While the cooperative can adopt its own rules and procedures, Stretch Zone must approve them, and these rules cannot restrict or expand the franchisee's rights or obligations under the Franchise Agreement.
Franchisees are bound by any lawful action of the Regional Advertising Cooperative at a meeting attended by 67% of the members, provided that 67% of the members present approve the action, subject to Stretch Zone's approval. A key obligation is contributing to the Regional Advertising Cooperative, where each member can be required to contribute the same amount, up to 2% of their monthly Gross Revenues. This contribution is credited against the franchisee's obligation for Local Advertising. Contributions must be submitted to the Regional Advertising Cooperative no later than the 10th day of each month for the preceding calendar month, along with any other required statements or reports.
The Regional Advertising Cooperative will prepare quarterly unaudited reports of its advertising and marketing expenditures, which will be sent to its members and to Stretch Zone. This ensures transparency in how the cooperative is managing and spending its funds. Prospective franchisees should be aware that Stretch Zone retains the right to form, change, dissolve, or merge any Cooperative, indicating that the structure and requirements of the cooperative can change over time. Franchisees should also inquire about the current and historical performance of regional advertising cooperatives in other DMAs to better understand the potential benefits and costs.