Does Alloy have a fiduciary obligation to franchisees regarding the Brand Development Fund?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
The Fund is intended to maximize general public recognition in all media, of the Proprietary Marks and patronage of Alloy Facilities and we have no obligation to make sure that expenditures of the Fund in or affecting any geographic area are proportionate or equivalent to payments of the Brand Development Fee by franchisees operating in that geographic area, or that any Facility will benefit directly or in proportion to the Brand Development Fees paid for the development of advertising and marketing materials or the placement of advertising. Your failure to derive this benefit will not serve as a basis for a reduction or elimination of your obligation to contribute to the Fund. We have no fiduciary obligation to you or any other Facility in connection with the establishment of the Fund or the collection, control or administration of Brand Development Fees.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 31–42)
What This Means (2025 FDD)
According to the 2025 FDD, Alloy does not have a fiduciary obligation to franchisees regarding the Brand Development Fund. Alloy retains full discretion over how the Brand Development Fund is spent, with the goal of maximizing general public recognition of Alloy's trademarks and facilities.
Alloy is not obligated to ensure that expenditures from the fund in any geographic area are proportionate or equivalent to the Brand Development Fees paid by franchisees in that area. Furthermore, Alloy does not guarantee that any specific facility will directly benefit in proportion to the fees paid for advertising and marketing materials. A franchisee's failure to derive a specific benefit from the fund will not reduce or eliminate their obligation to contribute to it.
Franchisees are required to pay a monthly Brand Development Fee equal to 2% of gross sales. Alloy will account for these funds separately from its other funds and may reimburse itself from the Brand Development Fund for the costs of developing, producing, and distributing advertising materials, as well as for collecting the Brand Development Fee. Alloy may also use the fund to subsidize refresher training or franchisee meetings. Any unspent funds will be carried over to the following year, and Alloy will provide an annual statement of funds collected and costs incurred upon written request. However, this statement is not required to be audited unless Alloy chooses to do so, in which case the audit will be at the Fund's expense.