What are the funds that Carls Jr. collects, administers, and spends for advertising and promotion purposes?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
During the operation of your Franchised Restaurant, we will:
- 1. Collect, administer and spend for advertising and promotion purposes monies paid by franchisees and company-operated restaurants into the Production Fund and Media Fund. (Franchise Agreement, §§8.B., C., and E.)
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 42–55)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Carls Jr. collects monies from both franchisees and company-operated restaurants for advertising and promotion purposes, which are then deposited into two main funds: the Production Fund and the Media Fund. Franchisees are obligated to contribute to these funds through an advertising and promotion obligation (APO), paid weekly. A portion of the APO is directed to the Production Fund, while the remainder is paid to the Media Fund, typically with approximately 1.0% of Gross Sales allocated to the Production Fund and 5% to the Media Fund. However, Carls Jr. retains the right to reallocate or change this APO split. These funds are used for various advertising, marketing, and public relations activities, with Carls Jr. having sole discretion over the creative content, materials, and media placement.
The Production Fund is used for the creation and development of advertising, marketing, public relations, research, gift card and loyalty programs, activities, and materials. The Media Fund covers all working media costs. Carls Jr. clarifies that these funds are not trust or escrow accounts, and the company does not have a fiduciary obligation to franchisees regarding these funds. Carls Jr. also reserves the right to terminate or restart these funds or establish different advertising funds and may incorporate any advertising fund or have a separate entity manage it.
In the fiscal year ending January 27, 2025, the Funds' expenditures were allocated as follows: 11% for production, 74% for media placement, 1% for research/marketing consulting fees, and 14% for miscellaneous expenses, including administrative costs. No money was spent to solicit new franchisees. Franchisees should note that Carls Jr. is not obligated to ensure that expenditures from these funds directly benefit any particular franchisee or are proportionate to their contribution. This means that while franchisees contribute to the funds, the benefits they receive from advertising and promotion efforts may vary.