Is Auntie Annes required to maintain the Ad Fund in a separate account?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
- B. Management of Ad Fund. You agree that: (i) we need not maintain the Ad Fund, your Advertising Contributions, or income earned from contributions to the Ad Fund in a separate account from our other funds; (ii) we are not a fiduciary with respect to your Advertising Contributions or the Ad Fund; and (iii) the Ad Fund is not a "trust." We are not required to have an independent audit of the Ad Fund completed. We will provide you with an annual summary of the expenditures of the Ad Fund on your reasonable request. If any monies in the Ad Fund remain at the end of a fiscal year, they will carry-over in the Ad Fund into the next fiscal year. We may treat any amounts that we contribute to the Ad Fund in excess of our required contributions for Businesses that we operate and any spending on advertising that we make in excess of the amounts then available in the Ad Fund as a loan from us to the Ad Fund. We have the right to be reimbursed from the Ad Fund any amounts that we loan to the Ad Fund.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, Auntie Annes is not required to maintain the Ad Fund in a separate account. The document specifies that Auntie Annes need not keep the Ad Fund, franchisee advertising contributions, or any income earned from these contributions in an account separate from their other funds. This means that the Ad Fund monies can be co-mingled with Auntie Annes's general operating funds.
Additionally, the FDD states that Auntie Annes is not a fiduciary with respect to franchisee advertising contributions or the Ad Fund, and the Ad Fund is not considered a trust. This clarifies the legal relationship between Auntie Annes and its franchisees regarding the Ad Fund, indicating that Auntie Annes has considerable discretion in managing the fund.
Furthermore, Auntie Annes is not required to have an independent audit of the Ad Fund completed. However, Auntie Annes will provide franchisees with an annual summary of the Ad Fund's expenditures upon reasonable request. Any remaining monies in the Ad Fund at the end of a fiscal year will carry over into the next fiscal year. Auntie Annes also has the right to treat any excess contributions or advertising spending as a loan from them to the Ad Fund, which they can then reimburse themselves from the Ad Fund.