Who has the discretion to decide how the Chocolate Bash Marketing Fund is spent?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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.
- (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.
- 9.4 Marketing Cooperatives. CB Franchising may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by CB Franchising.
Unless otherwise specified by CB Franchising, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, CB Franchising may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, CB Franchising has sole discretion over how the Marketing Fund is spent. This fund is used for marketing, advertising, and public relations at various levels, including local, regional, national, and international campaigns. These activities include developing and placing ads, sponsorships, contests, branding, website maintenance, social media, e-commerce, search engine optimization, market research, public relations, trade shows, printing, mailing, and administrative expenses.
This means that as a Chocolate Bash franchisee, you contribute to the Marketing Fund, but Chocolate Bash decides exactly how those funds are used. The FDD explicitly states that these expenditures do not need to be proportionate to a franchisee's contributions, nor do they have to provide any direct or indirect benefit to the franchisee. This is a common practice in franchising, where marketing is often handled centrally to maintain brand consistency and leverage economies of scale.
Furthermore, CB Franchising does not have a fiduciary duty regarding the Marketing Fund, which means they are not legally obligated to act in the franchisees' best interests when managing the fund. CB Franchising can also accumulate funds and carry the balance over to subsequent years or loan funds to the Marketing Fund if it operates at a deficit. While franchisees can request an unaudited annual financial statement of the Marketing Fund, the ultimate control and decision-making power rests with CB Franchising.
Chocolate Bash may also establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by CB Franchising. Unless otherwise specified by CB Franchising, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, CB Franchising may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.