Until what date did Stretch Zone have the ability to use the celebrity's likeness after the initial term?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
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Notes to Financial Statements December 31, 2023 and 2022
NOTE F - CELEBRITY ENDORSEMENT AND MARKETING
In January 2021, the Company entered into an agreement with a board member whereby a celebrity endorsement contract was established for a term of four years with the ability for the Company to use the celebrity's likeness for an additional twelve months. Effective March 31, 2023, the celebrity resigned from the board of directors and is no longer considered a related party. The agreement calls for annual payments relating to increased royalty revenue, with a minimum payment for year one of $200,000. The Company paid $632,497 and $725,013 for the years ended December 31, 2023, and 2022, respectively. Effective June 2023, the agreement was m
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, in January 2021, Stretch Zone entered into an agreement with a board member that established a celebrity endorsement contract. The initial term of this contract was four years, with an option for Stretch Zone to use the celebrity's likeness for an additional twelve months after the initial term. Therefore, the initial term would have ended in January 2025, and Stretch Zone would have had the ability to use the celebrity's likeness until January 2026.
However, the agreement was modified in June 2023 to limit payments to quarterly installments of $125,000, starting September 30, 2023. Furthermore, the terms of the original contract were extended to December 31, 2028. This extension could imply that the ability to use the celebrity's likeness was also extended, but the document does not explicitly state this.
Prospective franchisees should note that celebrity endorsements can be a significant marketing advantage, but the terms and conditions surrounding these agreements can change. It is important to understand the duration of the endorsement, the extent of usage rights, and any potential costs associated with the endorsement. Franchisees should also inquire about the impact of the celebrity's resignation from the board of directors on the endorsement agreement.
Given the modifications and extensions to the original agreement, it is advisable for potential Stretch Zone franchisees to seek clarification from the franchisor regarding the current terms of the celebrity endorsement contract and the specific dates during which Stretch Zone has the right to use the celebrity's likeness. This will help in assessing the potential marketing benefits and any associated risks or costs.