Are the Brand Development Fund Fees for an Alloy franchise held in trust?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
You must pay to us a weekly Brand Development Fund Fee in an amount equal to 2% of Gross Sales.
The Brand Development Fund Fee is separate from any local marketing requirements.
The Brand Development Fund Fees are not held by us in trust and will be spent in accordance with subparagraph 8.A of this Agreement.
BRAND ADVERTISING AND MARKETING
- A.
Brand Development Fund.
You must pay to us a Brand Development Fund Fee as set forth in subparagraph 9.D.
All Brand Development Fund Fees will be placed in a Brand Development Fund ("Fund") that we manage.
The Fund is not a trust or escrow account, and we have no fiduciary obligation to franchisees with respect to the Fund; provided, however, we will make a good faith effort to expend such fees in a manner that we determine is in the general best interests of the System.
We have the right to determine the expenditures of the amounts collected and the methods of marketing, advertising, media employed and contents, terms and conditions of marketing campaigns and promotional programs.
Because of the methods used, we are not required to spend a prorated amount on each facility or in each advertising market.
We have the right to make disbursements from the Fund for expenses incurred in connection with the cost of formulating, developing and implementing marketing, advertising and promotional campaigns.
The disbursements may include payments to us for the expense of administering the Fund, including accounting expenses and salaries and benefits paid to our employees engaged in the advertising functions.
If requested, we will provide you an annual unaudited statement of the financial condition of the Fund.
- B.
Required Local Expenditures and Grand Opening Advertising.
You must use your best efforts to promote and advertise the Business and participate in any local marketing and promotional programs we establish from time to time.
In addition to the Brand Development Fund Fee, you are required to spend (i) a minimum of $30,000 on approved grand opening advertising and marketing and such other amounts that we may require on a monthly basis, with the required local marketing requirements not to exceed 8% of Gross Sales (you must spend at least 2% on local marketing; we suggest you spend a minimum of 5%).
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the Brand Development Fund Fees are not held in trust. Franchisees must pay a weekly Brand Development Fund Fee equal to 2% of Gross Sales.
Alloy manages the Brand Development Fund, and it is not a trust or escrow account. While Alloy does not have a fiduciary obligation to franchisees regarding the fund, they will make a good faith effort to spend the fees in a manner that benefits the Alloy system. Alloy has the right to determine how the collected amounts are spent, including the marketing methods, advertising, and promotional campaigns used.
Disbursements from the Brand Development Fund may cover expenses related to formulating, developing, and implementing marketing and advertising campaigns. These disbursements can also include payments to Alloy for administering the fund, covering accounting expenses, salaries, and benefits for employees involved in advertising functions. Alloy will provide an annual unaudited statement of the fund's financial condition if requested.
In addition to the Brand Development Fund Fee, franchisees must spend a minimum of $30,000 on approved grand opening advertising and marketing. On a monthly basis, the required local marketing requirements should not exceed 8% of Gross Sales, with a minimum of 2% spent on local marketing (Alloy suggests spending at least 5%).