Is the Alloy Brand Development Fund a trust or escrow account?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
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 is not a trust or escrow account. Alloy manages the fund and has no fiduciary obligation to franchisees regarding the fund. However, Alloy states that it will make a good faith effort to spend the fees in a manner that it determines is in the general best interests of the Alloy system.
Alloy has the right to determine how the collected amounts are spent, including the methods of marketing, advertising, and media employed, as well as 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 because of the methods used.
Alloy can use the fund to cover expenses related to formulating, developing, and implementing marketing, advertising, and promotional campaigns. These expenses may include payments to Alloy for administering the fund, such as accounting expenses, salaries, and benefits for employees involved in advertising functions. If requested, Alloy will provide franchisees with an annual unaudited statement of the fund's financial condition.
This arrangement is fairly typical in franchising, where franchisors control brand development funds. However, franchisees should be aware that Alloy has significant discretion over how the fund is managed and spent, and it is not obligated to act as a fiduciary. Franchisees are entitled to request an annual financial statement of the fund, which can provide some transparency into how the money is being used.