factual

How does the Regional Advertising Cooperative Agreement affect the day-to-day operations of a Stretch Zone franchise?

Stretch_Zone Franchise · 2025 FDD

Answer from 2025 FDD Document

ton | Pending | | Wisconsin | May 1, 2025 |

EXHIBIT P – FORM OF REGIONAL ADVERTISING COOPERATIVE AGREEMENT

REGIONAL ADVERTISING COOPERATIVE AGREEMENT

This Regional Advertising Cooperative Agreement (this "Agreement") is signed on among Stretch Zone Franchising, LLC, a Florida limited liability
company (the "Franchisor");, d/b/a Stretch Zone (the "Member");
and DMA Stretch Zone Regional Advertising Cooperative, an
unincorporated association (the " DMA Cooperative").
BACKGROUND
A.
The Franchisor and the Member are Franchisor and Franchisee respectively under a
Stretch Zone Franchise Agreement (the "Franchise Agreement") relating to a Franchised Business
within the Designated Marketing Area ("DMA").
B.
Under Section 7.2 of the Franchise Agreement, the Franchisor has the right to
establish a Regional Advertising Cooperative in any DMA.
C.
This Agreement and Bylaws included in Exhibit A creates the DMA Cooperative for
the furtherance of each Member's sales and promotional efforts in connection with each Member's
operation of a Stretch Zone Franchise (collectively the "Franchises") and the Member's membership
in and participation with the DMA Cooperative.
The parties agree as follows:
TERMS
1.
PURPOSE.
The purpose of the DMA Cooperative is the furtherance of each
Member's sales and promotional efforts in connection with the operation of their Stretch Zone
Franchises through the joint pooling of funds for the creation and placement of advertising and
promotional campaigns and plans in the DMA. The DMA Cooperative will open a bank account in
its name with Bank of America into which advertising contributions are deposited and from which the
expenses incurred are paid. The Franchisor will be granted access to the account for monitoring
purposes.

3. MEMBERSHIP AND CONTRIBUTIONS.

(a) Qualification. Membership is open to all Stretch Zone Franchisees who are in good standing with Franchisor in the DMA and who sign this Agreement as required by the Franchise Agreement.

  1. TERM. This Agreement remains in effect until the Member ceases to be a Stretch

Zone Franchisee.

  • (b) Voting Rights. The Member is entitled to 1 vote within the DMA Cooperative on each matter that is required to be submitted to a vote of the Members as described in Article 3, Section 3 of the attached Bylaws of the DMA Cooperative.
  • (c) Contributions. The Member will contribute to the DMA Cooperative on a monthly basis, an amount not to exceed 1% of its Gross Revenues. The initial amount of monthly Contributions will be determined at the organizational meeting of the Members. All payments will be made through the ClubReady Electronic Payment system described in Section 3.3 of the Franchise Agreement. The amount of monthly Contributions to the DMA Cooperative will be reviewed and revised accordingly by majority vote of the Members at any regular meeting of the Members as provided in Article 4, Section 1 of the Bylaws.
  • (d) Delinquent Payments. All late payments accrue interest at the rate of 1.5% per month beginning the date payment was due until fully paid or at the highest rate permitted by applicable state law, whichever is less, calculated on a daily basis.
  • (e) Failure to Make Payments. If the Member fails to make 2 or more consecutive monthly contributions to the DMA Cooperative, the Franchisor may elect to terminate this Agreement and the Franchise Agreement for the Franchise Business if payment is not made within 30 days of receipt of the Franchisor's written demand for payment. If the delinquent payments are not made within the 30-day cure period, the Franchisor may immediately terminate this Agreement and the Franchise Agreement for the Franchise Business upon notice to the Member without providing any additional time to cure.
    1. ALLOCATION OF PROCEEDS. The funds collected by the DMA Cooperative from its Members will be used for any of the following expenditures as approved by the Members in accordance with the Bylaws and signed by the DMA Cooperative and the Franchisor in the form attached as Exhibit B:
    • (a) Television and radio media placement;
    • (b) Agency expenses relating to the placement of the advertising;
    • (c) Point-of-Purchase (P.O.P.) materials for the DMA Cooperative's promotions; and
  • (d) Administrative, professional fees and miscellaneous expenses related to the placement of advertising.

Provided the expenditures relate directly to advertising and promotions, other use of funds may be agreed upon by consent of 67% of the Members of the DMA Cooperative present at a meeting to decide on an alternative use of funds, called and held in accordance with Article 3 of the Bylaws.

    1. OBLIGATIONS OF DMA COOPERATIVE. The DMA Cooperative is responsible for the following in addition to any other obligations imposed by the Bylaws:
  • (a) The placement of advertising in the DMA that meets the Franchisor' standards and specifications;
  • (b) The submission of all proposed advertising and promotional plans and campaigns to the Franchisor for its prior approval as described in the Advertising Submission Agreement included as Exhibit B.

  • (c) The signing and delivery of an Advertising Submission Agreement to the Franchisor with all proposed advertising and promotional plans and campaigns;
  • (d) The filing of any and all periodic reports to the Franchisor which may be required pursuant to the Bylaws;
  • (e) Compliance with any requests by the Franchisor to cease the use of advertising campaigns or plans which the Franchisor, in its sole judgment, deems inappropriate or inconsistent with its standards; and
  • (f) Providing notification to the Franchisor if any Member fails to make 2 or more consecutive monthly contributions to the DMA Cooperative.
    1. OBLIGATIONS OF FRANCHISOR. In connection with the DMA Cooperative's placement of advertising in the DMA, the Franchisor is responsible for the following:
  • (a) The review of all advertising and promotional plans and campaigns, in whatever form, proposed for use by the DMA Cooperative, in the DMA;
  • (b) The Franchisor's approval or disapproval of all proposed advertising and promotional plans and campaigns submitted to the Franchisor will be within 10 days of the Franchisor's receipt of the items.

7. MISCELLANEOUS.

  • (a) Modification. No change or modification of this Agreement is valid unless it is in writing, making specific reference to amending this Agreement and signed by all of the parties.
  • (b) No Waiver. No waiver of any breach of any condition in this Agreement constitutes a waiver of any later breach.
  • (c) No Other Agreements. There are no verbal understandings between the parties. All conditions of the relationship between the parties are set forth in this Agreement, the Bylaws and the Franchise Agreement.
  • (d) Governing Law. This Agreement is governed by, and construed in accordance with, the laws of the state in which the DMA is located, which law shall govern upon a conflict of laws.
  • (e) Unenforceability. The invalidity or unenforceability of any particular provision of this Agreement does not affect the other provisions. This Agreement will be construed in all respects as if the invalid or unenforceable provisions were omitted.
  • (f) Binding Effect/Assignment. This Agreement becomes binding and inures to the benefit of the parties, its heirs, successors and assigns. The Franchisor reserves the right to assign, pledge, hypothecate or transfer this Agreement, or its interests in this Agreement, provided that the Member's rights and privileges granted in this Agreement are not affected. The Member can not assign or transfer this Agreement without the Franchisor's prior written consent.

[SIGANTURE PAGE FOLLOWS]

The parties have signed this Agreement the day and year first above written.

Stretch Zone Franchising, LLC Tony Zaccario, CEO and President COOPERATIVE: DMA Stretch Zone Regional Cooperative Its: MEMBER:

EXHIBIT A

BYLAWS FOR ___________________________ DMA COOPERATIVE (an Unincorporated Association)

ARTICLE 1 Statement of Purpose

Stretch Zone Franchising, LLC, a Florida limited liability company; and franchisor of the
Stretch Zone Franchises creates the DMA Cooperative as an
unincorporated association organized for the furtherance of each Franchised Outlet and
Company-Owned Outlet located in the DMA (the "Members"

Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)

What This Means (2025 FDD)

According to Stretch Zone's 2025 Franchise Disclosure Document, the Regional Advertising Cooperative Agreement, also referred to as the DMA Cooperative, significantly impacts the day-to-day operations of a Stretch Zone franchise. The DMA Cooperative is designed to bolster sales and promotional activities through pooled funds, which are then used for advertising and promotional campaigns within a specific Designated Marketing Area (DMA). This cooperative effort requires franchisees to jointly contribute to a common advertising fund, influencing how advertising strategies are developed and implemented. The funds are deposited into a Bank of America account, accessible by Stretch Zone for monitoring purposes. Franchisees contribute up to 1% of their gross revenues monthly, with the initial amount determined at an organizational meeting.

The DMA Cooperative's activities include creating and placing advertising, managing agency expenses, producing point-of-purchase materials, and covering administrative and professional fees related to advertising. Franchisees have a direct say in these activities through voting rights, with each member franchise entitled to one vote on matters such as fund allocation, the nature of advertising, and any increases in member contributions. However, the Officers of the DMA Cooperative manage the daily operations, including contracting for advertising production and placement.

Franchisees must adhere to the DMA Membership Agreement and the cooperative's bylaws. Failure to make timely payments can lead to penalties, including interest on late payments and potential termination of both the Regional Advertising Cooperative Agreement and the Franchise Agreement if payments are not made within a specified cure period. Furthermore, all advertising materials must be approved by Stretch Zone, which retains the rights to demand changes and owns the intellectual property rights related to the advertising. This ensures that all promotional efforts align with the brand's standards and policies, impacting how franchisees can market their individual locations.

The agreement remains effective as long as the franchisee remains a Stretch Zone franchisee. The cooperative's bylaws can be amended, but any changes affecting Stretch Zone's interests must be approved by the franchisor. This framework ensures a balance between local franchisee input and the franchisor's oversight in maintaining brand consistency and marketing effectiveness.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.
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