How will Carvel manage the Ad Fund after a Carvel Shoppe opens?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
d to conduct any advertising or spend any amount on advertising in your market. We may periodically formulate, develop, produce, and conduct, at our sole discretion, advertising or promotional programs in such forms and media as we determine to be most effective. We may make available to you for you to purchase approved advertising and promotional materials, including signs, posters, collaterals, etc. that we have prepared.
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).
We currently do not, and are not required to, maintain the Ad Fund, Advertising Contribution you paid, or income earned from contributions to the Ad Fund in a separate account from our other money. Our Shoppes will contribute to the Ad Fund in the same manner and in the same amounts as similarly-situated franchised Shoppes. Our other franchisees may not be required to contribute to the Ad Fund, may be required to contribute to the Ad Fund at a different rate than you, or may be required to contribute to a different advertising fund.
We or an affiliate will administer the Ad Fund. We have sole authority to direct all advertising programs and promotions and uses of the Ad Fund, with sole control over the creative concepts, materials, and media used in the programs, and the placement and allocation of advertising. We reserve the right to use any media, create any programs, and allocate advertising and promotional expenditures to any regions or locales we deem appropriate.
We may use the Ad Fund to meet the costs of administering, preparing, and conducting national, local, or regional advertising, promotional, or brand building programs of any kind, including the cost of (i) preparing and conducting television, radio, magazine, newspaper, and digital advertising campaigns and other public relations activities (including, but not limited to, for purposes of brand reputation management), (ii) employing public relations firms and advertising agencies to assist in these activities, and (iii) conducting other activities that are directly or indirectly designed to promote the System, its franchisees, and/or increase System sales, such as limited-time menu offerings, crew incentives, franchisee incentive and/or promotional programs, customized materials (e.g., cups), up-sell programs, guest response programs, manager/employee recognition programs, quality assurance and food safety programs, mystery shop and shopper programs, brand websites and ordering platforms, brand applications, social media account administration and promotion, and in-shoppe equipment and technologies related to such marketing programs. We may use the Ad Fund to compensate us for the reasonable administrative costs and overhead we incur in activities related to advertising and promotional programs, including new product development; market research; preparing advertising and promotional materials; Digital Marketing (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 or an affiliate will administer the Ad Fund, having sole authority over advertising programs, promotions, and the use of the Ad Fund. This includes complete control over creative concepts, materials, media, and the allocation of advertising. Carvel reserves the right to use any media, create programs, and allocate advertising expenditures to regions or locales as deemed appropriate.
Franchisees are required to make Advertising Contributions, which are currently 3% of Net Sales, except for Cinnabon Co-Branded Shoppes in Other Locations (excluding Swirl Shoppes) where the contribution is 2.5% of Net Sales. Hosted Express Shoppes do not require a contribution. Carvel may increase the Advertising Contribution with notice to franchisees, but the combined Advertising Contribution and Local Marketing Obligation will not exceed 5% of Net Sales. These contributions are in addition to the Local Marketing Obligation and Grand Opening Obligation.
In Fiscal Year 2024, the Ad Fund expenditures were allocated as follows: 16% on media placement, 35% on production and agency fees, 10% on guest response programs and menu innovation projects, 36% on brand and category marketing expenses, and 3% on administrative expenses. Carvel is not required to have an independent audit of the Ad Fund completed but will provide an annual summary of expenditures upon reasonable request. Any remaining monies in the Ad Fund at the end of a fiscal year will carry over to the next year. Carvel intends for the Ad Fund to be perpetual but may terminate it after all contributions have been spent.
While Carvel does not have a formal advertising council, the Carvel Franchise Advisory Council (FAC) provides suggestions on advertising issues. The FAC is advisory only and does not have decision-making authority. A majority of the FAC members are franchisees in good standing, nominated and elected by other franchisees. Carvel has the power to form, change, or dissolve the FAC or any other advertising or advisory council at any time.