Does Carvel specify any reporting requirements related to the Ad Fund?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
We are not required to have an independent audit of the Ad Fund completed. We will provide you with an annual summary of the expenditures of the Ad Fund on your reasonable request but are not required to prepare financial statements for the Ad Fund. If any monies in the Ad Fund remain at the end of a fiscal year, they will carry-over in the Ad Fund into the next fiscal year. Any amounts that we or our affiliates contribute to the Ad Fund in excess of the required Advertising Contribution
for Shoppes that we or they operate and any spending on advertising that we or they make in excess of the amounts then available in the Ad Fund will be considered an advance from us or our affiliates to the Ad Fund. We and/or our affiliates have the right to be reimbursed from the Ad Fund any amounts that are advanced to the Ad Fund.
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 is not required to have an independent audit of the Ad Fund completed. However, Carvel will provide franchisees with an annual summary of the Ad Fund's expenditures upon reasonable request, but they are not required to prepare financial statements for the Ad Fund.
This means that while Carvel franchisees contribute a percentage of their net sales to the Ad Fund (3%, or 2.5% for Cinnabon Co-Branded Shoppes in Other Locations excluding Swirl Shoppes, and 0% for Hosted Express Shoppes), they do not have a guaranteed right to a fully audited financial statement detailing exactly how the funds are spent. Instead, they are entitled to an annual summary of expenditures.
The FDD specifies how the Ad Fund was spent in Fiscal Year 2024: 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. This provides some transparency into the types of activities the Ad Fund supports. However, the lack of a mandatory independent audit may be a concern for some franchisees, as it relies on Carvel's internal reporting.
Prospective franchisees may want to inquire about the level of detail provided in the annual summary, the process for requesting additional information about Ad Fund expenditures, and whether Carvel has ever conducted an independent audit of the Ad Fund in the past, even though it is not currently required.