Does CB Franchising have to use the Chocolate Bash Marketing Fund?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) Use.
CB Franchising shall use the Marketing Fund only for marketing, advertising, and public relations materials, programs and campaigns (including at local, regional, national, and/or international level), and related overhead.
The foregoing includes such activities and expenses as CB Franchising reasonably determines, and may include, without limitation: development and placement of advertising and promotions; sponsorships; contests and sweepstakes; development of décor, trade dress, Marks, and/or branding; development and maintenance of brand websites; social media; internet activities; e-commerce programs; search engine optimization; market research; public relations, media or agency costs; trade shows and other events; printing and mailing; and administrative and overhead expenses related to the Marketing Fund (including the compensation of CB Franchising's employees working on marketing and for accounting, bookkeeping, reporting, legal and other expenses related to the Marketing Fund).
- (c) Discretion.
Franchisee agrees that expenditures from the Marketing Fund need not be proportionate to contributions made by Franchisee or provide any direct or indirect benefit to Franchisee.
The Marketing Fund will be spent at CB Franchising's sole discretion, and CB Franchising has no fiduciary duty with regard to the Marketing Fund.
- (d) Contribution by Other Outlets.
CB Franchising is not obligated to (i) have all other Chocolate Bash businesses (whether owned by other franchisees or by CB Franchising or its
affiliates) contribute to the Marketing Fund, or (ii) have other Chocolate Bash businesses that do contribute to the Marketing Fund contribute the same amount or at the same rate as Franchisee.
- (e) Surplus or Deficit.
CB Franchising may accumulate funds in the Marketing Fund and carry the balance over to subsequent years.
If the Marketing Fund operates at a deficit or requires additional funds at any time, CB Franchising may loan such funds to the Marketing Fund on reasonable terms.
- (f) Financial Statement.
CB Franchising will prepare an unaudited annual financial statement of the Marketing Fund within 120 days of the close of CB Franchising's fiscal year and will provide the financial statement to Franchisee upon request.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, CB Franchising is required to use the Marketing Fund specifically for marketing, advertising, and public relations purposes. This includes creating materials, programs, and campaigns at various levels (local, regional, national, or international), along with covering related overhead costs. These activities and expenses are determined by CB Franchising and can include advertising, promotions, sponsorships, branding, website maintenance, social media, e-commerce, market research, public relations, trade shows, printing, mailing, and administrative expenses related to the Marketing Fund, including employee compensation and legal fees.
However, the expenditures from the Marketing Fund do not need to be proportionate to the contributions made by individual franchisees, nor do they have to provide any direct or indirect benefit to each specific franchisee. The Marketing Fund will be spent at CB Franchising's discretion, and CB Franchising does not have a fiduciary duty regarding the Marketing Fund. CB Franchising is also not obligated to have all Chocolate Bash businesses contribute to the Marketing Fund or contribute the same amount or rate as other franchisees.
CB Franchising can accumulate funds in the Marketing Fund and carry over any balance to subsequent years. If the Marketing Fund has a deficit or requires additional funds, CB Franchising may loan funds to it on reasonable terms. Franchisees are entitled to receive an unaudited annual financial statement of the Marketing Fund within 120 days of the close of CB Franchising's fiscal year, upon request.
In addition to the Marketing Fund, Chocolate Bash may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative exists for the franchisee's area when they start operating, they must immediately join. If one is created later, the franchisee must join within 30 days. CB Franchising will determine the governance, organization, and start date of each Market Cooperative and may require it to adopt bylaws or regulations prepared by Chocolate Bash. Unless Chocolate Bash specifies otherwise, the activities of each Market Cooperative are decided by a majority vote of its members. CB Franchising is entitled to attend and participate in any Market Cooperative meeting and has the same voting rights as franchisees for any Chocolate Bash businesses it owns in the Market Cooperative.