How are Alloy brand fund fees collected from franchisees?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
- B.
Royalty Fee.
In addition to the Initial Franchise Fee, during the full term of this Agreement, or any Interim Period, and in consideration of the rights granted to you, you must pay to us a weekly Royalty Fee equal to 7% of Gross Sales.
- C.
Brand Development Fund Fee.
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.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees are required to pay a weekly Brand Development Fund Fee, which is 2% of their Gross Sales. This fee is separate from any local marketing requirements that Alloy may impose. These Brand Development Fund Fees are not held in trust by Alloy, and the company will spend them according to the terms outlined in subparagraph 8.A of the Franchise Agreement.
Alloy manages the Brand Development Fund, and all Brand Development Fund Fees are placed into it. While the fund is not a trust or escrow account and Alloy does not have a fiduciary obligation to franchisees regarding the fund, Alloy states it will make a good faith effort to expend such 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, media employed, and the contents, terms, and conditions of marketing campaigns and promotional programs.
Disbursements from the Brand Development Fund may cover expenses related to formulating, developing, and implementing marketing, advertising, and promotional campaigns. These disbursements may include payments to Alloy for administering the fund, covering accounting expenses, salaries, and benefits paid to employees involved in advertising functions. If a franchisee requests it, Alloy will provide an annual unaudited statement of the financial condition of the Fund.
In addition to the Brand Development Fund Fee, Alloy franchisees are required to spend a minimum of $30,000 on approved grand opening advertising and marketing. They must also spend other amounts that Alloy may require on a monthly basis, with the total required local marketing expenditures not exceeding 8% of Gross Sales (with a minimum of 2% spent on local marketing, and a suggested minimum of 5%).