Does Alloy have a fiduciary obligation to franchisees with respect to the Brand Development Fund?
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, Alloy does not have a fiduciary obligation to its franchisees regarding the Brand Development Fund. While Alloy manages the Brand Development Fund, it is explicitly stated that the fund is not a trust or escrow account, and Alloy has no fiduciary duty to franchisees concerning the fund's management. However, Alloy states that 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 retains the right to decide how the collected funds are spent, including the marketing methods, advertising channels, and the content of marketing campaigns and promotional programs. Alloy is not obligated to spend a prorated amount on each facility or in each advertising market due to the methods it employs.
Disbursements from the Brand Development Fund may cover expenses related to creating and implementing marketing and advertising campaigns. These disbursements can also include payments to Alloy for administering the fund, covering accounting expenses, and compensating employees involved in advertising functions. Franchisees are entitled to receive an annual unaudited statement of the fund's financial condition upon request.