Who administers the Carl's Jr. Fund that domestic Carl's Jr. restaurants contribute to?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Domestic Carl's Jr. restaurants contribute to a co-operative advertising fund (the "Carl's Jr. Fund") that is administered by Manager. Domestic Hardee's restaurants contribute to Hardee's National Advertising Fund ("HNAF") that is administered by Manager and co-operative advertising funds that are administered by a third party (collectively, the "Hardee's Funds"), but consolidated by Manager since Manager is the primary beneficiary of the Hardee's Funds. Further, both international Carl's Jr. restaurants and Hardee's restaurants contribute to certain international advertising funds that are administered by Manager.
We expense advertising costs for company-operated restaurants' contributions to the Carl's Jr. Fund and the Hardee's Funds as company-operated restaurants revenue is earned since we are obligated to share ratably in the cost of the related advertising programs. The cost oflocal and incremental advertising that is not funded by the Carl's Jr. Fund or the Hardee's Funds is expensed as incurred.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to the 2024 FDD, domestic Carl's Jr. restaurants contribute to the Carl's Jr. Fund, which is a cooperative advertising fund. This fund is administered by 'Manager'. It is common practice in franchising for advertising funds to be managed either by the franchisor or a designated entity, ensuring brand consistency and coordinated marketing efforts.
Carls also notes that domestic Hardee's restaurants contribute to the Hardee's National Advertising Fund (HNAF), which is also administered by Manager, along with cooperative advertising funds managed by a third party. These Hardee's Funds are consolidated by Manager, as Manager is the primary beneficiary. Both international Carl's Jr. and Hardee's restaurants contribute to international advertising funds, also administered by Manager.
Carls expenses advertising costs for company-operated restaurants' contributions to both the Carl's Jr. Fund and the Hardee's Funds as revenue is earned. This is because Carls is obligated to share ratably in the cost of the related advertising programs. Local and incremental advertising costs not covered by these funds are expensed as incurred.
For a prospective Carls franchisee, this means that a portion of their revenue will be contributed to the Carl's Jr. Fund, which is used for advertising and marketing programs. The franchisee should inquire about the specific percentage of revenue contributed, how the funds are allocated, and the types of advertising and marketing activities supported by the fund. Understanding the administration and use of these advertising funds is crucial for assessing the potential benefits and costs associated with the Carls franchise.