How does 360 Painting account for underspending or overspending of National Advertising Fund (NAF) contributions?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
be prepared annually, and shall be made available to Franchisee upon request. Franchisor may spend in any fiscal year more or less than the aggregate contribution of all 360 Painting Businesses to the Marketing Fund in that year, and the Marketing Fund may borrow from Franchisor or others to cover deficits or invest any surplus for future use. Any lender loaning money to the Marketing Fund shall receive interest at a reasonable rate. All interest earned on monies contributed to the Marketing Fund will be used to pay advertising costs before other assets of the Marketing Fund are expended. Franchisor may cause the Marketing Fund to be incorporated or operated through a separate entity at such time as Franchisor may deem appropriate, and such successor entity, if established, will have all rights and duties specified in this Section 11.2. Franchisor will not be liable for any act or omission with respect to the Marketing Fund that is consistent with this Agreement and done in good faith. Except as expressly provided in this Section 11.2, Franchisor assumes no direct or indirect liability or obligation to Franchisee with respect to the maintenance, direction or administration of the Marketing Fund. Franchisee acknowledges and agrees that Franchisor is not operating or acting as a trustee or fiduciary with respect to the Marketing Fund Contributions collected. Franchisee agrees to participate in any promotion, marketing or advertising campaigns created by the Marketing Fund. Franchisor may reduce contributions of franchises to the Marketing Fund and upon notice to Franchisee, reduce the Marketing Fund's operation or terminate the Marketing Fund and distribute unspent monies to those contributing franchisees in proportion to their contributions in the past.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the franchisor has the ability to manage the National Advertising Fund (NAF) with some flexibility regarding annual expenditures. Specifically, 360 Painting may spend more or less than the total contributions from all franchisees in any given fiscal year.
To manage potential deficits in the NAF, 360 Painting is permitted to borrow funds from the franchisor or other sources. If the NAF has a surplus, these funds may be invested for future use. Any loans taken out by the NAF will accrue interest at a reasonable rate, and any interest earned on the NAF's assets will be prioritized for advertising costs before other assets are used.
360 Painting also retains the right to reduce contributions to the Marketing Fund, reduce the Marketing Fund's operation, or terminate the Marketing Fund altogether, distributing any unspent monies to the contributing franchisees in proportion to their past contributions. This provides 360 Painting with options to adjust the advertising strategy and fund management based on the needs of the franchise system. These financial statements are prepared annually and are available to franchisees upon request.