How will the Brand Development Fund Fees be 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.
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.
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.
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%).
Upon our request, you must provide us with itemization and proof of marketing and an accounting of the monies that you have spent for approved grand opening advertising.
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 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 manage the fund, with all expenditures at the discretion of Alloy. As of December 31, 2024, the funds collected but not yet spent totaled $403,344, and $185,052 as of December 31, 2023.
Alloy has the right to determine how the collected amounts are spent, including the methods of marketing, advertising, media employed, and the contents, terms, and conditions of marketing campaigns and promotional programs. Alloy is not required to spend a prorated amount on each facility or in each advertising market. Disbursements from the fund may cover expenses related to formulating, developing, and implementing marketing, advertising, and promotional campaigns. These disbursements can include payments to Alloy for administering the fund, covering accounting expenses, salaries, and benefits for employees involved in advertising functions.
For franchisees, this means that while they contribute 2% of their gross sales to the Brand Development Fund, Alloy has significant control over how those funds are used. While Alloy states they will make a good faith effort to expend the fees in a manner that is in the general best interests of the System, the FDD specifies that the fund is not a trust or escrow account, and Alloy has no fiduciary obligation to franchisees with respect to the fund. Franchisees are entitled to an annual unaudited statement of the fund's financial condition if requested.
In addition to the Brand Development Fund Fee, franchisees are also 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 are not to exceed 8% of Gross Sales, with a minimum of 2% to be spent on local marketing (Alloy suggests a minimum of 5%). Franchisees must provide itemization and proof of marketing expenditures upon Alloy's request.