In addition to the Software Fee, Winmark has established a North American Ad Fund, requiring Plato's Closet franchisees to contribute 2% of their sales to this fund starting July 1, 2026. This contribution will increase the total marketing expenditure for franchisees from 5% to 6% of their sales. The Ad Fund is designed to improve brand visibility through targeted marketing initiatives and creative campaigns. If implemented during fiscal 2025, the Ad Fund would have amounted to approximately $13.5 million.
While these changes align with existing franchise agreements and system standards, they introduce new financial obligations for franchisees. The company anticipates that the primary impact on its financial statements will be an increase in revenues, accompanied by a corresponding rise in expenses. However, the introduction of these fees also presents potential risks, including the possibility of strained franchisee relationships and operational challenges. Franchisees may perceive these initiatives as burdensome, which could affect their satisfaction and compliance, ultimately impacting franchisee retention and the overall performance of Winmark's franchise systems. The company remains committed to supporting its franchisees while navigating these changes.
