Can Chem Dry audit a franchisee's advertising expenditures?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
e amount of any sales tax imposed by any federal, state, municipal or other governmental authority directly on sales and collected from customers, provided that the amount thereof is added to the selling price or absorbed therein and actually paid by FRANCHISEE to such governmental authority.
B. BRAND MARKETING FUND
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- Recognizing the value of advertising and marketing to the development of goodwill and the public image of Chem-Dry Businesses, CDI has established a Brand Marketing Fund (the "BMF") for the advertising, marketing and public relations programs and materials CDI deems appropriate to promote the Chem-Dry brand. FRANCHISEE agrees to contribute a continuing, non-refundable, monthly amount between $100 and $300 as determined by CDI (the "BMF Contribution"). The BMF Contribution shall be payable on the 25th day of each month beginning the same month your first Monthly Franchise Fee payment is due. Chem-Dry Businesses operated by CDI or its affiliates shall contribute to the BMF on the same basis as Chem-Dry Business franchisees. The BMF Contribution can be increased to a maximum of $300 upon 30 days prior written notice from CDI to all FRANCHISEES. The separate BMF account is not a trust fund and CDI is not a fiduciary with regard to the separate BMF account or the monies on deposit therein.
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- We may deposit marketing, promotional and other payments we receive from suppliers or you into the BMF. CDI, not an advertising council, will administer the BMF and will disburse the BMF to pay for marketing, advertising, promotional, public relations, and other similar activities solely intended to benefit the System and all franchised and any company-owned locations. Those activities may include (without limitation) (a) market research, (b) marketing technology development and implementation, (c) customer service, loyalty and reward programs, (d) media purchases, (e) advertising production, (f) advertising and public relations agency fees and expenses, (g) product consumer-related research, and (h) creative services. We also may use the BMF to pay or reimburse us for our administrative overhead expenses incurred for activities supported by the BMF by both in-house marketing and third-party marketing. Any amounts in the BMF not spent at the end of each fiscal year will remain in the BMF, provided that amounts contributed to the BMF may be used to pay taxes associated with unspent amounts on deposit in the BMF.
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- We will direct all activities and programs funded by the BMF with the assistance of a Chem-Dry Brand Marketing Fund Committee (the "Committee"). The Committee will be an advisory board comprised of franchisees and CDI corporate staff. The BMF will not be audited,
however an unaudited financial statement and a summary of expenditures (the "Annual Report") will be prepared annually by CDI. Upon your written request, we will provide the Annual Report to FRANCHISEE for the most recently ended fiscal year as Confidential Information. You acknowledge that we have no obligation to expend BMF amounts for BMF activities that provide a specific benefit equivalent or proportionate benefit to your BMF Contribution, and we do not warrant or guaranty that you will receive or derive any benefit from BMF activities. We will make final reports of studies and reports produced by the BMF available to you at no cost as Confidential Information.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, Chem Dry franchisees contribute to a Brand Marketing Fund (BMF) for advertising, marketing, and public relations programs. Franchisees contribute a monthly amount between $100 and $300, as determined by Chem Dry. This contribution is non-refundable and payable on the 25th of each month, starting when the first Monthly Franchise Fee payment is due. Chem-Dry Businesses operated by Chem Dry or its affiliates contribute to the BMF on the same basis as franchisees. The BMF Contribution can be increased to a maximum of $300 upon 30 days prior written notice from Chem Dry to all FRANCHISEES.
Chem Dry administers the BMF and disburses funds for marketing, advertising, promotional, public relations, and similar activities to benefit the Chem Dry system. These activities may include market research, marketing technology, customer service programs, media purchases, advertising production, agency fees, product research, and creative services. Chem Dry may also use the BMF to cover administrative overhead expenses for in-house and third-party marketing activities. Any unspent amounts in the BMF at the end of each fiscal year remain in the fund and may be used to pay taxes associated with these unspent amounts.
While the Brand Marketing Fund itself will not be audited, Chem Dry will prepare an unaudited financial statement and a summary of expenditures (the "Annual Report") annually. This report will be provided to franchisees upon written request as Confidential Information. Chem Dry does not guarantee that franchisees will receive a benefit equivalent to their BMF contributions, nor does it warrant any specific benefit from BMF activities. Chem Dry retains the right to suspend, terminate, or reinstate the BMF at any time, but the BMF will not terminate until all amounts have been spent for the specified purposes.
The FDD excerpt does not state whether Chem Dry can audit a franchisee's individual advertising expenditures. A prospective franchisee should clarify with Chem Dry whether they have the right to audit a franchisee's advertising expenditures.