What is the purpose of the Brand Development Fund for Alloy franchisees?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ording to the terms of your Minimum Performance Schedule.
Brand Development Fund
You must pay us a monthly Brand Development Fee equal to 2% of Gross Sales to be contributed to the Brand Development Fund ("Fund") for marketing, promotion brand development programs to promote the Alloy System. Facilities owned by us and our affiliates will contribute to the Fund on the same basis as franchisees. We have the right to establish and administer the Fund. As stated in Item 8, we may contribute Allowances we receive from approved suppliers to the Fund. If we choose to do this, it does not reduce or eliminate your obligation to
pay the Brand Development Fee. During our 2024 fiscal year, use of the Brand Development Fees was as follows:
| Videography/photography assets | 7% |
|---|---|
| National Public Relations | 78% |
| National Marketing | 15% |
| Total | 100% |
The Fund will be used for regional or national advertising, publicity and promotion relating to our business. We will determine, in our fully unrestricted discretion, the manner in which the Fund will be spent. Some portion of the Fund may be used for creative concept production, marketing surveys, test marketing and related purposes. We have the right to direct all advertising activities with sole discretion over creative concepts, materials and media used, as well as their placement and allocation. We also have the right to determine the composition of all geographic and market areas for the implementation of these advertising and promotional activities, although we are not required to spend any specific amount in your Designated Area (as described in Item 12).
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. No amount of the Fund will be spent for advertising that is principally a solicitation for the sale of franchises.
Funds from the Brand Development Fees paid will be accounted for separately from our other funds. We have the right to reimburse ourselves out of the Fund for the total costs (including indirect costs such as salaries for our employees who devote time and effort to Fund related activities and overhead expenses) of developing, producing and distributing any advertising materials and collecting the Brand Development Fee. We may also use money from the Fund to subsidize the cost of presenting refresher training or a franchisee meeting.
Any sums paid to the Fund that are not spent in the year they are collected will be carried over to the following year. We will prepare, and furnish to you upon written request, an annual statement of funds collected and costs incurred.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 31–42)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the Brand Development Fund is used for marketing, promotion, and brand development programs to promote the Alloy system. Alloy and its affiliates contribute to the fund on the same basis as franchisees. Franchisees are required to pay a monthly Brand Development Fee equal to 2% of gross sales, which goes into this fund.
The fund is intended to maximize general public recognition of Alloy's Proprietary Marks and patronage of Alloy Facilities across all media. Alloy has complete discretion over how the fund is spent, including regional or national advertising, publicity, promotion, creative concept production, marketing surveys, and test marketing. Alloy is not obligated to ensure that expenditures in any geographic area are proportionate or equivalent to payments made by franchisees in that area, nor is there an obligation to ensure that any Facility benefits directly or in proportion to the fees paid.
Alloy retains the right to reimburse itself from the fund for the total costs of developing, producing, and distributing advertising materials, as well as for collecting the Brand Development Fee. This includes indirect costs such as employee salaries and overhead. Alloy may also use the fund to subsidize the cost of 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, Alloy is not required to have the fund statement audited unless they choose to do so, in which case the audit will be at the fund's expense.
This arrangement is fairly typical in franchising, where brand development funds are common. However, franchisees should note that Alloy has significant discretion over how the fund is spent and is not obligated to ensure direct benefits to individual locations or proportional spending based on contributions. Franchisees are still obligated to contribute to the fund, regardless of whether they perceive a direct benefit.