Does Aw assume any direct liability to franchisees regarding the Aw Marketing Fund?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
no requirement that the Marketing Fund be audited.
You understand and acknowledge that the Marketing Fund is intended to maximize recognition of the Marks and patronage of Papa Ray's Pizza Restaurants. Although we intend to use the Marketing Fund to develop advertising, marketing and promotional materials, and to place advertising in a manner that will benefit all Papa Ray's Pizza Restaurants, we have no obligation to ensure that expenditures by the Marketing Fund in or affecting any geographic area are proportionate or equivalent to contributions to the Marketing Fund by Papa Ray's Pizza Restaurants operating in that geographic area or that any Papa Ray's Pizza Restaurant will benefit directly or in proportion to its contribution to the Marketing Fund from the development of advertising, marketing and promotional materials or the placement of advertising. Contributions to the Marketing Fund will not be used principally to solicit new franchise sales. We assume no direct or indirect liability or obligation to you with respect to the maintenance, direction or administration of the Marketing Fund. We have the right to discontinue or reestablish the Marketing Fund. If the Marketing Fund is discontinued, all amounts remaining in the Marketing Fund on the date of discontinuance will be distributed to franchisees in proportion to their respective contributions.
In the year ended December 31, 2024, we did not collect any Marketing Fund contributions from franchisees.
We currently do not have an advertising council of franchisees that advises us on advertising policies, but we may establish one in the future.
We may designate or approve the establishment of a local or regional advertising cooperative consisting of franchisees in a certain area for purposes of developing cooperative local or regional advertising or promotional programs. The area covered by the cooperative will be determined by us.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, Aw assumes no direct liability to franchisees regarding the Marketing Fund, except as expressly provided in the franchise agreement. While Aw endeavors to use the Marketing Fund to benefit all Papa Ray's Pizza Restaurants, it does not guarantee that expenditures in any geographic area will be proportionate to contributions from restaurants in that area, or that any restaurant will benefit directly or in proportion to its contribution. This means that franchisees may not see a direct return on their Marketing Fund contributions in their specific location.
Aw has sole discretion over the advertising, marketing, and promotional programs financed by the Marketing Fund, including creative concepts, materials, endorsements, and the geographic, market, and media placement and allocation of the programs. The Marketing Fund is a separate account from Aw's other funds and will not be used for general operating expenses, except for reasonable salaries, administrative costs, and overhead related to the fund's administration. Aw may spend more or less than the total contributions in any fiscal year and may borrow from or lend to the Marketing Fund.
Franchisees are required to contribute a percentage of their gross revenue to the Marketing Fund, as detailed in Paragraph 10.3 of the franchise agreement. In addition to contributing to the Marketing Fund, franchisees must spend a minimum of $3,800.00 per month on local advertising, marketing, and promotion after the initial three-month grand opening period. These local advertising expenditures are subject to Aw's approval and direction, and franchisees may be required to use designated suppliers. Franchisees must provide an accurate accounting of their local advertising expenditures to Aw on a quarterly basis.
If Aw discontinues the Marketing Fund, any unspent amounts will be distributed to franchisees in proportion to their contributions over the most recent six months. This provides some assurance that franchisees will receive a return of their contributions if the fund is terminated. However, franchisees should be aware that Aw has significant control over the Marketing Fund and its expenditures, and there is no guarantee of a direct or proportionate benefit to individual locations.