What obligation does Carvel undertake regarding advertising expenditures on behalf of a Carvel Hosted Express Shoppe franchisee?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
eting 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; working with public relations firms, advertising agencies, advertising placement services, and creative talent; reimbursing franchisee advisory council meeting expenses; developing and maintaining, and paying third parties for the development and maintenance of, websites, applications, and other equipment and technologies related to marketing programs. We will not spend the Ad Fund in a manner that (i) exclusively benefits our licensees that manufacture and sell products bearing the Marks, if any, or (ii) is principally a solicitation for the sale of franchises.
D. No Proportionate Benefit; No Right to Withhold Contribution. The advertising and promotions that we conduct are intended to maximize general public recognition and patronage of the System generally in the manner that we determine to be most effective. We are not obligated to ensure that the expenditures from the Ad Fund are proportionate or equivalent to your contributions or that the Franchised Business will benefit directly or pro rata or in any amount from the placement of advertising. You will spend and/or contribute all advertising contributions, including the Advertising Contribution, provided for in this Agreement without reduction regardless of your perceived benefit to the Franchised Business or the amount of contribution by other franchisees operating Businesses or the default of these advertising obligations by any other franchisees.
10.4 Advertising Cooperatives.
- A. Participation. You will participate, if we require, in any local, regional, or national cooperative advertising group consisting of other Businesses (an "Advertising Cooperative") that we specify, when and if any of these groups are created. We will designate the particular Advertising Cooperative(s) in which you may be required to participate (which designations may be based on, without limitation, the particular Designated Market Area or the Area of Dominant Influence, as those terms are used in the advertising industry, where your Franchised Business is located). If we collect the entire Local Marketing Obligation, we will not require you to participate in an Advertising Cooperative. You will enter into any formal agreements with the other franchisees of the System and/or us, as the case may be, as is necessary or appropriate to accomplish the goals of this Section 10.4 and you must abide by the formal agreements and decisions that we authorize the Advertising Cooperative to make on advertising and marketing in the area covered by the Advertising Cooperative.
- B. Payments. Your payments to any Advertising Cooperative will be determined by you and those other franchisees and/or us, as the case may be, who are participants in the Advertising Cooperative, as stated in the by-laws of that Advertising Cooperative or membership, dues, participation, or other payment agreements of the Advertising Cooperative. Amounts paid to an Advertising Cooperative will be credited against your Local Marketing Obligation as specified in Section 10.1.E. (Local Marketing Obligation). Any contributions that you make to an Advertising Cooperative shall be additional to your Advertising Contribution as specified in Section 3.2.B. (Advertising Contribution) and your Grand Opening Obligation as specified in Section 10.1.C. (Grand Opening Advertising).
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, Carvel conducts advertising and promotions intended to maximize general public recognition and patronage of the Carvel system. Carvel is not obligated to ensure that advertising expenditures from the Ad Fund are proportionate or equivalent to a franchisee's contributions, nor is Carvel obligated to ensure that a franchised business will benefit directly or pro rata from the placement of advertising. The franchisee must contribute all advertising contributions without reduction, regardless of their perceived benefit to the franchised business or the amount of contribution by other franchisees.
Carvel may require the franchisee to pay all or a portion of their Local Marketing Obligation to Carvel. Carvel, in its sole discretion, may contribute this to the Ad Fund, spend it on national, regional, or local advertising campaigns, contribute to an Advertising Cooperative in the franchisee's market, or spend it on local advertising in the franchisee's market. If Carvel exercises its right to collect the entire Local Marketing Obligation, the franchisee will not be required to spend a minimum amount on local advertising (other than the Grand Opening Obligation), provide a local marketing plan, or participate in the Advertising Cooperative. Carvel is not obligated to ensure that the Local Marketing Obligation monies that it spends are proportionate or equivalent to the franchisee's contributions or that the franchised business will benefit directly or pro rata from the placement of advertising.
Carvel may also establish temporary or permanent promotional campaigns applicable to the Carvel system. These promotional campaigns may also promote, or involve the participation of, restaurants or businesses other than Businesses, such as restaurants or businesses operated under different brands that are operated or licensed by Carvel's affiliates.
For a Carvel Hosted Express Shoppe, the franchisee must spend at least the amount specified in Schedule A on grand opening advertising promoting the opening of their franchised business within the period beginning 90 days before the Opening Date and ending 90 days after the Opening Date. Alternatively, Carvel may require the franchisee to pay the Grand Opening Obligation to Carvel or the Ad Fund for Carvel to spend in accordance with a grand opening advertising plan that Carvel designates or approves. If the franchisee fails to make advertising expenditures, Carvel has the right to either require the franchisee to spend the remaining amount on local marketing advertising, in addition to their Local Marketing Obligation, or spend an amount not to exceed the franchisee's Grand Opening Obligation on promoting the opening of their franchised business, in which case the franchisee must reimburse Carvel for these expenses.