Franchising in Belarus: how to assess the advertising levy

An advertising levy can easily look like a small addition to the cost of a franchise. Yet a franchisee may be paying simultaneously for network-wide promotion, advertising for their own outlet and compulsory promotional campaigns. Before signing the agreement, it is important to understand not just how much you will pay, but how the money will be used. A transparent shared advertising budget is fundamental to trust between a brand owner and its franchise partners.

1. Separate the advertising levy from other costs

An advertising or marketing levy is usually intended to promote the brand and its network. It is distinct from the initial franchise fee and the royalties paid for using the package of rights granted under the agreement. However, the name of the payment alone does not explain what the franchisor is committing to provide.

Ask for a consolidated list of the advertising costs you will bear. It should identify the following separately:

• the compulsory contribution to network-wide promotion;
• the minimum local advertising budget;
• launch signage and promotional display costs;
• production of printed materials, photographs and videos;
• agency fees, advertising platform charges and service costs;
• discounts and other costs associated with network-wide promotions.

Then establish which items the levy covers and which are charged on top. For example, the network might fund the creation of a standard design, while the local partner pays to adapt, print and display it. This allocation is not necessarily a drawback, provided it is clear in advance.

Pay particular attention to the phrase “marketing support included”. It may mean no more than access to ready-made images, rather than paid advertising. Ask for this broad promise to be replaced with a list of specific activities and the costs each party will cover.

2. Check how the shared budget benefits your outlet

Before buying, request a sample advertising report for a completed reporting period and an example promotional plan. If the information is confidential, suggest receiving an anonymised document or reviewing it after signing a non-disclosure agreement. The aim is to understand the spending breakdown, not to obtain someone else’s commercial secrets.

Divide activities into three groups: building brand awareness, attracting customers to specific outlets and recruiting new franchisees. The last of these primarily helps the network owner sell franchises. If existing partners fund it, this should be explicitly disclosed and agreed, rather than hidden within vaguely defined “development costs”.

For an outlet in Belarus, check the geographical scope of campaigns separately. Promoting an international brand may increase awareness without necessarily bringing customers to your town or city. Ask how funds are allocated between countries and locations, and whether the budget pays for campaigns that do not reach the local audience.

Do not insist on a guarantee of advertising-generated revenue. It is more useful to agree on verifiable performance measures: advertising placements delivered, spending by channel, visits to your outlet’s webpage, enquiries or use of promotional codes. Reach and impressions should not automatically be treated as sales.

Speak to existing franchise partners: do they receive reports, understand the spending and have the opportunity to suggest local campaigns? This tests how shared funding works in practice, rather than simply how convincing the presentation is.

3. Set out calculation and reporting rules in the agreement

In Belarus, franchising is specifically regulated by Chapter 53 of the Civil Code, which contains provisions on the agreement for a comprehensive business licence (franchising). The agreement must be in writing and registered with the National Centre of Intellectual Property. Agree the advertising schedule alongside the main agreement, and check with a lawyer whether subsequent amendments require registration.

Registration of the agreement is no substitute for checking advertising promises. Do not assume that the name of the levy alone entitles you to a detailed report or a particular level of local advertising. These obligations need to be set out in the contractual documents.

For the payment calculation, specify the amount or formula, the calculation period and the payment deadline. If the levy is based on revenue, clarify how taxes, refunds, cancelled orders and sales through intermediaries are treated. State when the levy starts to accrue: on signing the agreement, opening the outlet or another agreed event. Separately define the procedure for changing the rate.

To monitor spending, propose including:

• an exhaustive list of permitted uses of the funds;
• the frequency of reports and the deadline for providing them;
• a breakdown by campaign, channel and geographical area;
• rules for accounting for any unspent balance;
• the right to request explanations and supporting documents;
• a deadline for responding to a franchise partner’s comments or objections.

Check whether the franchisor receives a fee for managing the advertising and whether this is included in the levy. A separate bank account is not necessarily essential, but separate accounting for receipts and expenditure will make the shared budget easier to monitor.

4. Agree how disputed spending will be handled

Before paying, discuss three situations: a campaign is not delivered, a report is not provided, or money is spent on purposes that have not been agreed. Each needs a clear notification procedure, a deadline for remedying the issue and contractual consequences. These might include an adjustment to the charge, a credit or a refund of the relevant amount, depending on the agreed terms and legal advice.

Do not include an automatic right to stop paying without having it checked by a lawyer. Unilaterally withholding payments could turn an advertising dispute into a debt owed by the franchisee. It is safer to establish in advance how objections will be reviewed and disputes resolved.

Practical takeaway: agree to an advertising levy when you can answer four questions: how much you pay, what the money is spent on, what evidence supports the spending and what happens if the agreed terms are breached. If the answers exist only in correspondence with a sales manager, have them incorporated into the agreement before you buy.