Is the Brand Development Fund for Beard Papas considered a trust?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees that the Brand Development Fund may be used to pay various costs and expenses of Franchisor for such reasonable salaries, wages, administrative costs and overhead as Franchisor may incur in activities reasonably related to the administration, activities and/or the brand awareness goals of the Brand Development Fund including expenses incurred by Franchisor for advertising, marketing, product and service testing, product and service development, maintenance, evaluation and monitoring of the Business Management Systems, upgrades to the System Website, development of Digital Media and creative development that is internally administered or prepared by Franchisor and other marketing activities made by Franchisor, provided, however, that salary expenses for Franchisor's personnel paid by the Brand Development Fund shall be commensurate with the amount of that time spent by such personnel on Brand Development Fund matters.
Franchisor shall not use contributions to the Brand Development Fund to defray any of Franchisor's general operating expenses, except for such reasonable salaries, administrative costs and overhead as Franchisor may incur in activities reasonably related to the administration and activities of the Brand Development Fund and creation or conduct of its marketing programs including, without limitation, conducting market research, preparing advertising and marketing materials and collecting and accounting for contributions to the Brand Development Fund.
Franchisor may spend in a fiscal year an amount greater or less than the aggregate contributions of all Beard Papa's Shops to the Brand Development Fund in that year;
(6) Franchisee agrees to participate in all advertising, marketing, promotions, research and public relations programs instituted by the Brand Development Fund;
(7) Beard Papa's Shops owned by Franchisor or Franchisor's affiliates are not required to pay any Brand Development Fund Fee or contribute to or make any contribution to the Brand Development Fund;
(8) Franchisee and Franchisor acknowledge and agree that (a) the Brand Development Fund is not a trust, (b) Franchisor is not a trustee or fiduciary of the Brand Development Fund, and (c) Franchisor may deposit and maintain any and all funds of the Brand Development Fund Fee in Franchisor's general accounts.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, the Brand Development Fund is not considered a trust. The FDD explicitly states that the fund is not a trust, and Beard Papas is not a trustee or fiduciary of the fund. Additionally, the document clarifies that Beard Papas can deposit and maintain the Brand Development Fund fees in its general accounts, indicating a lack of segregation typically associated with trust funds.
This arrangement gives Beard Papas significant control over the Brand Development Fund. Franchisees should recognize that Beard Papas has the authority to manage and utilize the fund as it deems appropriate, without the legal obligations and oversight typically associated with a trust. This includes the ability to use the fund for various costs and expenses related to the administration and brand awareness goals, such as salaries, administrative costs, and marketing programs.
For a prospective Beard Papas franchisee, this means the Brand Development Fund contributions are not held in a separate trust account for the exclusive benefit of the franchisees. While the fund is intended to enhance the overall brand, franchisees have no guarantee that expenditures will directly benefit their specific location or geographic area. Franchisees are obligated to participate in all advertising and marketing programs instituted by the fund, regardless of the perceived benefit to their individual Beard Papas shop.
It's also important to note that Beard Papas's own shops or those of its affiliates are not required to contribute to the Brand Development Fund, which could potentially create a disparity in the financial obligations within the franchise system. Franchisees should carefully consider these factors and seek clarification from Beard Papas regarding the fund's management and allocation of resources before investing in a franchise.