Is Chicken Guy required to segregate Brand Fund and Regional Advertising Funds from other monies?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
We will separately account for all of the Brand Fund and the Regional Advertising Funds that we administer; however, we are not required to segregate any of the funds from our other monies. None of the funds shall be used to defray any of our general operating expenses. We and our affiliates may be reimbursed by each fund for expenses directly related to the fund's marketing programs including conducting market research, preparing advertising and marketing materials and collecting and accounting for contributions to each fund. We may spend in any fiscal year an amount greater or less than the aggregate contribution of all Chicken Guy! Restaurants to each fund during the year or cause each fund to invest any surplus for future use by the fund. We will prepare an unaudited report of the operations of each fund annually, which will be available to you upon written request. Company-operated Restaurants contribute to the various advertising funds and cooperatives an amount equivalent to that contributed by comparable franchised Chicken Guy! Restaurants. In spending advertising monies, we are not obligated to make expenditures for any franchisee that are equivalent or proportionate to that franchisee's contribution or to ensure that any particular franchisee benefits directly or on a pro rata basis from expenditure of the funds. We are not required to spend any amount on advertising in the area where your Franchised Restaurant is located.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 25–34)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, while Chicken Guy will separately account for the Brand Fund and Regional Advertising Funds, it is not required to keep these funds strictly segregated from its other monies. This means that while Chicken Guy will track the income and expenses of these funds separately, the cash itself may be commingled with Chicken Guy's general operating funds.
This policy has implications for Chicken Guy franchisees. Although the advertising funds cannot be used for Chicken Guy's general operating expenses, the lack of segregation could potentially increase the risk of the funds being used for other purposes if Chicken Guy faces financial difficulties. However, Chicken Guy does commit to providing an unaudited report of the operations of each fund annually, which will be available to franchisees upon written request, offering some transparency.
It is also important to note that Chicken Guy, and its affiliates, can be reimbursed by the Brand Fund and Regional Advertising Funds for expenses directly related to the fund's marketing programs. This includes expenses for market research, preparing advertising and marketing materials, and collecting and accounting for contributions to each fund. This is a fairly standard practice in franchising, as the franchisor typically incurs costs in managing and administering the advertising funds on behalf of the franchisees.