Is the Brand Development Fund for Alloy a trust or escrow account?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
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 duty to franchisees regarding the fund. Alloy commits to making 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 decide how the collected amounts are spent, including the marketing methods, advertising, media, and the content of marketing campaigns and promotional programs. The document specifies that Alloy is not required to spend a prorated amount on each facility or in each advertising market due to the methods used.
Alloy can use the fund to cover expenses related to creating and implementing marketing, advertising, and promotional campaigns. These expenses may include payments to Alloy for administering the fund, covering accounting expenses, and salaries and benefits for employees involved in advertising functions. If a franchisee requests it, Alloy will provide an annual unaudited statement of the fund's financial condition.
This arrangement is typical in franchising, where franchisors often control brand development funds. However, the lack of a fiduciary obligation means franchisees have less direct control over how their contributions are spent, increasing the importance of transparency and regular reporting from Alloy.