The Advertising Fee–SEI’s Property

During National Coalition Board meetings, franchisees often raise questions about the advertising fee charged by SEI and the way it is spent. This issue has been brought to SEI’s attention, but the company’s response was not a satisfying one as the information posted on 7-Connect lacks details and is not updated.

I decided to look into this and read what our Franchise Agreement says on the matter. The language on this subject is no different than any other in our agreement, and not very helpful. It says:

1. “You agree to pay us the Advertising Fee in the same manner and at the same time as you pay us in accordance with Paragraph 10. The Advertising Fee becomes OUR PROPERTY to be spent by us in accordance with paragraph 22 (a) (3) and is not held by us in trust.”

2. The Advertising Fee is based on a store’s Base Period Gross Profit, and can vary from 0.5 percent to 1.5 percent.

3. It is up to SEI’s sole discretion to arrange all advertising for the 7-Eleven system, service mark, related trademarks or merchandise. Our agreement further says that SEI can spend as much as it wants for local, regional or national promotions.

4. It is very interesting that at one point the agreement states, “We agree to accept suggestions from 7-Eleven franchisees on the use of the funds collected as Advertising Fees, provided, however, you agree that we have and will continue to have the sole and absolute right to determine how Advertising Fees will be spent, including the selection, direction and geographic allocation of Advertising Materials and programs and the type of media utilized, and that we and our Affiliates have no fiduciary obligation spielautomaten online to you or other 7-Eleven franchisees with respect to such determination or expenditures of the Advertising Fees.”

There are other clauses in the agreement that give SEI the right to reimburse itself for any expenses it accrued for creating and developing advertising materials and other programs from the fees collected, and that give an option for company–operated stores not to pay any advertising fee. SEI agrees to inform franchisees on the advertising amount spent marketwise, and it has total control on all kinds of local, Internet, and other kinds of advertising.

The last clause on advertising fees mentions food service promotions and the use of point-of–sale support designated by SEI. This part needs a lot of attention, especially as it pertains to fresh sandwiches. SEI has done a considerably good job with POP when it is funded by vendors, and we have seen storefront and window banners advertising grill and bakery items. However, so far our customers have not seen any banners promoting fresh sandwiches—the only signs we have are on top of our Sanden cases. Customers can only see those if they are already in our stores for something else. No billboards or other types of advertisements are out there that can drive fresh sandwich customers to our stores. Perhaps the reason behind this is that no vendor supports it, as it is an in-house product.

We all know that any type of aggressive advertisement leads to more sales. Franchisees hope that the company would analyze the total amount spent by other food service chains on advertising compared to their merchandise sales, and increase this amount for better results. This was proven in my area a few years back when SEI, my FOA, and vendors created a unique summer advertising program when our local economy took the first hit of the recession. I hope this suggestion is accepted positively, even though the implementation is SEI’s sole right, and it can spend collected property the way it likes.