Does the Chocolate Bash franchise agreement create a fiduciary duty between CB Franchising and the franchisee?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
ses 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.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, CB Franchising does not have a fiduciary duty to franchisees regarding the Marketing Fund. Specifically, the FDD states that the Marketing Fund will be spent at CB Franchising's sole discretion.
This means that Chocolate Bash franchisees cannot demand that the franchisor spend marketing funds in a way that directly benefits them. The franchisor has complete control over how the Marketing Fund is used, without needing to prioritize individual franchisee interests.
This arrangement is typical in many franchise systems, where franchisors manage marketing funds for the overall benefit of the brand. While franchisees contribute to the fund, they do not have a legal say in how it is spent. However, Chocolate Bash does provide an unaudited annual financial statement of the Marketing Fund to franchisees upon request, allowing franchisees to review how the funds are being managed.