Is a Browns Chicken franchisee entitled to review a statement of monies collected and costs incurred by the Advertising Fund?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
The Advertising Fund will be accounted for separately from the other funds of Brown and will not be used to defray any of Brown's general operating expenses, except for such reasonable salaries, administrative costs and overhead as Brown may incur in activities reasonably related to the administration of the Advertising Fund and its advertising programs (including, without limitation, conducting market research, preparing advertising and marketing materials, and collecting and accounting for contributions to the Advertising Fund). Brown may spend in any fiscal year an amount greater or less than the aggregate contribution of BROWN'S Stores to the Advertising Fund in that year and the Advertising Fund may borrow from Brown or other lenders to cover deficits of the Advertising Fund or cause the Advertising Fund to invest any surplus for future use by the Advertising Fund. You authorize Brown to collect for remission to the Advertising Fund any advertising monies or credits offered by any supplier to you based upon your purchases. All interest earned on monies contributed to the Advertising Fund will be used to pay advertising costs of the Advertising Fund before other assets of the Advertising Fund are expended. A statement of monies collected and costs incurred by the Advertising Fund will be prepared annually by Brown and will be reviewed with you upon written request.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 25–30)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, Browns Chicken prepares an annual statement of monies collected and costs incurred by the Advertising Fund. Upon written request, a franchisee is entitled to review this statement with Browns Chicken.
This means that Browns Chicken franchisees have the right to request and review the financial activities of the Advertising Fund, which is funded by a percentage of their gross sales. This provides a level of transparency, allowing franchisees to see how the advertising fees they contribute are being used.
However, Browns Chicken has sole discretion over the advertising programs financed by the Advertising Fund, including creative concepts, materials, endorsements, and geographic placement. While Browns Chicken aims to benefit all Browns Chicken stores, there is no guarantee that expenditures will be proportionate to contributions from stores in any specific area. Browns Chicken also has no fiduciary obligation to franchisees regarding the Advertising Fund.
Prospective franchisees should consider the implications of these terms. While they have the right to review the Advertising Fund's financial statement, they have limited control over how the funds are spent. It is important to understand that Browns Chicken has broad discretion in administering the fund and is not obligated to ensure that advertising expenditures directly benefit each franchisee in proportion to their contributions.