Can Carvel increase the Advertising Contribution?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Ad Fund. We will allocate your Advertising Contributions to a fund for the advertising and promotion of the Shoppes, the Proprietary Marks, and the System (the "Ad Fund"). Currently, you must make Advertising Contributions to the Ad Fund in the amount of 3% of Net Sales, except if you operate a Cinnabon Co-Branded Shoppe in Other Locations (excluding Swirl Shoppes) the contribution is 2.5% of Net Sales and if you operate a Hosted Express Shoppe no contribution is required. We may increase the Advertising Contribution by notice to franchisees. However, your required Advertising Contribution and Local Marketing Obligation will collectively not exceed 5% of your Net Sales. Your Advertising Contribution is in addition to your Local Marketing Obligation and your Grand Opening Obligation (as defined below).
Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 59–74)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel has the ability to increase the Advertising Contribution paid by franchisees. Currently, franchisees must contribute 3% of Net Sales to the Ad Fund, except for Cinnabon Co-Branded Shoppes in Other Locations (excluding Swirl Shoppes) where the contribution is 2.5% of Net Sales, and Hosted Express Shoppes which have no contribution requirement. Carvel can increase this percentage with notice to franchisees.
However, the FDD stipulates that the total of the Advertising Contribution and the Local Marketing Obligation cannot exceed 5% of the franchisee's Net Sales. The Advertising Contribution is separate from the Local Marketing Obligation and the Grand Opening Obligation. This means that if Carvel increases the Advertising Contribution, it might affect the amount required for local marketing, ensuring the combined total stays within the 5% limit.
This clause provides Carvel with flexibility in managing advertising funds, but it also introduces a potential financial risk for franchisees. While an increase in the advertising contribution could lead to more effective marketing campaigns, it could also reduce the funds available for local marketing efforts, potentially impacting the franchisee's ability to promote their specific location. Franchisees should consider this potential change and its impact on their overall marketing strategy and budget.