How are the Brand Development Fund Fees spent by Alloy?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
Pursuant to the structured form of the franchising arrangement, the Company collects brand fund fees of 2% of franchisees' reported sales. These funds are spent solely on advertising and related expenses for the benefit of the franchisees with a portion designated to offset the Company's administrative costs to administer the funds, all at the discretion of the Company. Funds collected and not yet expended on the franchisees' behalf totaled $403,344 and $185,052 as of December 31, 2024 and 2023, respectively. There were no funds expended on the franchisees' behalf but not yet received by the Company for the years ended December 31, 2024, 2023 and 2022.
- 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, which are collected at 2% of franchisees' reported sales, are to be spent solely on advertising and related expenses for the benefit of the franchisees. A portion of these funds may be used to offset Alloy's administrative costs to administer the funds. The franchisor has the discretion to decide how the funds are spent. As of December 31, 2024, the funds collected and not yet expended totaled $403,344, while the amount was $185,052 as of December 31, 2023.
Alloy retains the right to determine the expenditures from the Brand Development Fund, including the methods of marketing, advertising, and media employed, as well as the contents, terms, and conditions of marketing campaigns and promotional programs. The FDD states that Alloy is not required to spend a prorated amount on each facility or in each advertising market due to the methods used.
Disbursements from the Brand Development Fund may cover expenses related to formulating, developing, and implementing marketing, advertising, and promotional campaigns. These disbursements can also include payments to Alloy for the expense of administering the Fund, covering accounting expenses, salaries, and benefits paid to employees engaged in advertising functions. Franchisees can request an annual unaudited statement of the financial condition of the Fund.
In addition to the Brand Development Fund Fee, franchisees are required to spend a minimum of $30,000 on approved grand opening advertising and marketing, and other amounts that Alloy may require on a monthly basis. The required local marketing requirements should not exceed 8% of Gross Sales, with a minimum of 2% to be spent on local marketing (Alloy suggests spending at least 5%).