What is Alloy's obligation regarding the expenditure of Brand Development Fund fees?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
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, franchisees must pay a Brand Development Fund Fee, which is managed by Alloy. While the fund isn't held in trust or escrow, Alloy commits to making a good faith effort to spend the fees in a way that benefits the Alloy system as a whole. Alloy has the authority to decide how the collected funds are spent, including the marketing methods, advertising channels, and the specifics of promotional campaigns.
Alloy isn't obligated to spend a specific portion of the Brand Development Fund on each individual franchise or within each advertising market. The company can use the fund to cover the costs of creating and running marketing and advertising campaigns. This includes payments to Alloy for managing the fund, covering accounting costs, and compensating employees involved in advertising activities.
Franchisees can request an annual unaudited statement showing the financial condition of the Brand Development Fund. Additionally, Alloy has the right to establish a regional advertising cooperative where they can collect up to 1% of the franchisees' gross revenues. Any contributions to this cooperative will be credited towards the franchisee's local marketing expenditures. According to the FDD as of December 31, 2024, the Regional Advertising Cooperative was not yet established.
In summary, while Alloy retains significant control over the Brand Development Fund, they are expected to act in good faith to benefit the franchise system. Franchisees have the right to request financial statements related to the fund and may be required to participate in regional advertising cooperatives if established.