When exercising discretion, is Burros Fries required to consider a franchisee's individual interests?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
The System Advertising Fee is to be received by us on or before the fifth (5th) day of each month for the prior month's Gross Revenue (as defined above in Section 10.A). This fee will be deposited into our System Advertising Account (the "Fund") for ongoing technology or new product development (including recipes and menu items) or kitchen equipment development, and such national advertising or public relations programs as we, in our sole discretion, may deem appropriate to promote our mark. The Fund may also be used for local franchisee group advertising or marketing and Franchisee advisory council expenses; local, regional, national or international advertising or marketing; administration of advertising and marketing (including salaries, accounting, collection, legal and other costs), related expenses and any media (including media production costs) or agency costs. We will direct all such programs, and will have sole discretion over the creative concepts, materials, endorsements and media used in such programs, and the placement or allocation of such programs. We reserve the right to determine in our sole discretionthe composition of all geographic territories and market areas for the implementation and development of such programs. The Burros & Fries Restaurants owned by our affiliates may will contribute on the same basis to the Fund but are not required.
We may disclose the identity of vendors who pay promotional allowances to us upon request and only after Franchisee's signing an appropriate non-disclosure agreement. We have the right to spend that money as we determine. We are not obliged to spend more on advertising and marketing than the amount of the Fund. Any unspent balance in the Fund at the end of the year may be carried over to later years and used for the purposes described in this Agreement. Neither we nor any of our members has any fiduciary duty to the Franchisee regarding any System Advertising Fund.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, when making decisions about the System Advertising Fund, Burros Fries has sole discretion and no fiduciary duty to individual franchisees. Specifically, Burros Fries determines how to spend the advertising fees collected from franchisees.
This means that while franchisees contribute to the System Advertising Fund, Burros Fries is not obligated to consider the individual financial interests or preferences of each franchisee when deciding how to allocate those funds. Burros Fries has the authority to use the fund for various purposes, including technology development, new product development, national advertising, public relations, and even franchisee advisory council expenses.
This arrangement is typical in many franchise systems, where the franchisor manages advertising and marketing efforts for the benefit of the entire brand. However, it's important for prospective Burros Fries franchisees to understand that they may not have direct control over how their advertising fees are spent and that Burros Fries's decisions may not always align perfectly with their individual business needs or market conditions. Franchisees are subject to Burros Fries's discretion in these matters.