Can Carvel use the Ad Fund for customized materials like cups?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
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); 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, internet sites, applications, and other equipment and technologies related to marketing programs.
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, the Ad Fund can be used for customized materials. Specifically, Carvel may use the Ad Fund to cover the costs of various advertising, promotional, and brand-building initiatives. These initiatives can include the creation of customized materials such as cups, which are intended to promote the Carvel system and increase sales. This means that a portion of the Ad Fund, which franchisees contribute to, may be allocated to produce branded cups or similar items for marketing purposes.
Carvel has sole authority over the Ad Fund, including how it is spent and allocated. While franchisees contribute a percentage of their net sales to the Ad Fund (typically 3%, but as low as 2.5% for Cinnabon co-branded locations, and 0% for Hosted Express Shoppes), Carvel ultimately decides which advertising and promotional programs to invest in. This includes the types of media used, the creative content, and the allocation of spending across different regions or locales. Franchisees do not have direct control over these decisions, though the Carvel Franchise Advisory Council provides suggestions on advertising issues.
For a prospective Carvel franchisee, this means that while they contribute to the Ad Fund, they may not have direct influence over whether resources are allocated to specific items like customized cups. However, the FDD indicates that such expenditures are permissible uses of the fund. Franchisees are required to participate in system-wide marketing initiatives, but they also have a local marketing obligation, requiring them to spend a percentage of net sales on local advertising. This local spending is subject to Carvel's approval to ensure brand consistency.
It's important for franchisees to understand that Carvel is not obligated to spend Ad Fund monies in a way that directly benefits each franchisee proportionately. The goal is to maximize general public recognition and patronage of the Carvel system as a whole. Franchisees should inquire about Carvel's typical allocation of Ad Fund resources and the process for suggesting or requesting specific marketing initiatives in their area.