To which funds does the Carls Jr. franchisee pay the advertising and promotion obligation (APO)?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
During the term of the Franchise Agreement, you will have an advertising and promotion obligation ("APO"), paid on a weekly basis, in the amount set forth in an appendix to the Franchise Agreement. You will pay that portion of the APO as we direct to the Production Fund described in the next paragraph. The remainder of the APO shall be paid, at the same time and in the same manner as the royalty fee, to a Media Fund. Currently, approximately 1.0% of Gross Sales is paid to the Production Fund and 5% of Gross Sales is paid to the Media Fund. CJR reserves the right to reallocate or change the APO split. There is no franchisee advertising council that advises CJR on advertising policy.
Our predecessor has established, and we will maintain and administer, a fund for the creation and development of advertising, marketing and public relations, research and related programs, gift card and loyalty programs, activities and materials that we, in our sole discretion, deem appropriate ("Production Fund"). Vendors and suppliers also may contribute to the Production Fund. We or our designee direct all advertising, marketing, and public relations programs and activities financed by the Production Fund with sole discretion over the creative concepts, materials and endorsements used in those programs and activities, and the geographic, market and media placement and allocation of advertising and marketing materials. We usually work with an advertising agency in developing advertising for print, radio, Internet and television and leverage internal and contract creative services.
Our predecessor also has established, and we will maintain and administer, a fund for all working media costs ("Media Fund"). We or our designee direct all advertising, marketing, and public relations programs and activities financed by the Media Fund with sole discretion over the creative concepts,
materials and endorsements used in those programs and activities, and the geographic, market and media placement and allocation of advertising and marketing materials.
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, franchisees are obligated to contribute to advertising and promotion efforts through an Advertising and Promotion Obligation (APO). This APO is paid weekly and split between two funds: the Production Fund and the Media Fund. The specific allocation of the APO is determined by Carls Jr., with the document stating that approximately 1.0% of Gross Sales is allocated to the Production Fund and 5% of Gross Sales is allocated to the Media Fund. However, Carls Jr. retains the right to reallocate or change this split.
The Production Fund is used for the creation and development of advertising, marketing, public relations, research, gift card and loyalty programs, and related activities and materials. Carls Jr. has sole discretion over the creative concepts, materials, endorsements, and the placement and allocation of advertising and marketing materials financed by this fund. The Media Fund is used for all working media costs, and Carls Jr. also has sole discretion over the programs and activities financed by the Media Fund.
Carls Jr. maintains separate bookkeeping accounts for both advertising funds and prepares an unaudited report of the funds' operations annually, which is available to franchisees upon written request. It's important to note that the funds are not trust or escrow accounts, and Carls Jr. does not have a fiduciary obligation to franchisees regarding these funds. While restaurants operated by Carls Jr. contribute to the advertising funds at an equivalent rate to franchised restaurants, Carls Jr. is not obligated to ensure that expenditures benefit any particular franchisee directly or on a pro rata basis.