Can the Black Bear Diner company use national advertising funds to reimburse its own costs?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
ovides additional information about the Companyowned and franchised restaurants operating as of December 25, 2024 and December 27, 2023:
| Cash flows from investing activities: | | | |---|---|---| | ( 168,891) | ( 296,015) | | | Purchases of property and equipment | | | | Net cash used in investing activities | ( 168,891) | ( 296,015) | The Company-owned restaurants are operated by Bear Tracks Holdings LLC (BTH), an entity under common control with the Company. The Company and BTH are owned by BBD Opco LLC (Parent). BBD Opco LLC is owned by BBD Intermediate Holdco, LLC (Intermediate) and for which Intermediate is ultimately owned by BBD Holdco LLC (Holdco).
The Company also operates a national advertising fund (NAF) which administers national, regional, and local advertising and marketing initiatives for the brand. The Company receives funds from Black Bear Diner branded restaurants approximating 1.00% of revenue. The Company physically segregates these funds to ensure that the funds are utilized specifically for advertising and other brand
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the company can use the national advertising fund (NAF) to reimburse its own costs associated with administering the fund. Black Bear Diner collects funds from its branded restaurants, approximating 1.00% of revenue, and segregates these funds for advertising and brand development initiatives.
The FDD specifies that Black Bear Diner may utilize these franchisee-contributed funds to cover its costs, including salaries and other internal costs related to administering the NAF. For the year ending December 25, 2024, these reimbursements totaled $172,139, and for the year ending December 27, 2023, they totaled $118,881. These amounts are reflected as reductions within payroll and benefits expenses on the company's income statements.
This practice means that a portion of the advertising fees paid by franchisees is used to offset Black Bear Diner's administrative expenses. While this is permitted, prospective franchisees should consider the impact of these reimbursements on the overall advertising budget and the effectiveness of the advertising campaigns. It is important to note that the production costs of advertising are expensed when the advertisements are first aired or displayed, and all other advertising and promotional costs are expensed in the period incurred.