If other Carvel franchisees are not required to contribute to the Ad Fund, what are the possible alternative arrangements?

According to Carvel's 2025 Franchise Disclosure Document, some franchisees may have different advertising contribution requirements. Specifically, other Carvel franchisees may not be required to contribute to the Ad Fund at all, may be required to contribute at a different rate, or may be required to contribute to a different advertising fund altogether. This means that the standard 3% of Net Sales contribution may not apply universally across all Carvel franchise locations. For example, Cinnabon Co-Branded Shoppes in Other Locations (excluding Swirl Shoppes) contribute 2.5% of Net Sales, and Hosted Express Shoppes have no contribution requirement.

This variation in advertising contributions could impact a franchisee's financial planning. A prospective franchisee should clarify with Carvel the specific advertising contribution requirements for their type of Shoppe and location. Understanding these obligations is crucial for accurately forecasting expenses and profitability.

Additionally, Carvel has the right to collect all or a portion of a franchisee's Local Marketing Obligation, which is currently 2% of Net Sales (or 1% for Ice Cream Trucks or Co-Branded Shoppes). If Carvel exercises this right, it can then (a) contribute the funds to the Ad Fund, (b) spend them on national, regional, or local advertising campaigns, (c) contribute them to the franchisee's Advertising Cooperative, or (d) spend them on local advertising in the franchisee's market. If Carvel collects the entire Local Marketing Obligation, the franchisee is not required to spend a minimum amount on local advertising (other than the Grand Opening Obligation), provide a local marketing plan, or participate in an Advertising Cooperative. This provides Carvel with flexibility in managing advertising resources across the franchise system, but it also means that a franchisee may have less direct control over local marketing efforts if Carvel chooses to manage those funds directly.