Are franchisees required to contribute to the 'Marketing Fund' established by Chocolate Bash?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
[Item 22: CONTRACTS]
- (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.
[Item 22: CONTRACTS]
- (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.
If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative.
If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days.
CB Franchising shall not require Franchisee to be a member of more than one Market Cooperative.
If CB Franchising establishes a Market Cooperative:
- (a) Governance.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by CB Franchising.
CB Franchising may require the Market Cooperative to adopt bylaws or regulations prepared 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.
CB Franchising will be entitled to attend and participate in any meeting of a Market Cooperative.
Any Chocolate Bash business owned by CB Franchising in the Market Cooperative shall have the same voting rights as those owned by its franchisees.
Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement.
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.
- (b) Purpose.
Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to CB Franchising's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval.
[Item 22: CONTRACTS]
"Marketing Fund" means the fund established (or which may be established) by CB Franchising into which Marketing Fund Contributions are deposited.
(d) Marketing. CB Franchising shall manage the Marketing Fund.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, franchisees may be required to contribute to a marketing fund and may be required to participate in a marketing cooperative. The document defines the 'Marketing Fund' as a fund established (or which may be established) by CB Franchising into which Marketing Fund Contributions are deposited. CB Franchising manages the Marketing Fund. 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. 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. CB Franchising is not obligated to have all other Chocolate Bash businesses contribute to the Marketing Fund, or contribute the same amount or at the same rate as Franchisee. 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.
Chocolate Bash may establish market advertising and promotional cooperative funds ('Market Cooperative') in any geographical areas. If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative. If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days. CB Franchising shall not require Franchisee to be a member of more than one Market Cooperative. Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to CB Franchising's approval) standardized promotional materials for use by the members in local advertising and promotion.
This means that as a Chocolate Bash franchisee, you may be required to participate in a local marketing cooperative if one exists in your area, and contribute funds to that cooperative. However, the FDD excerpt does not specify the contribution amount or the percentage of sales that franchisees must contribute to either the Marketing Fund or the Market Cooperative. It also states that CB Franchising has sole discretion on how the Marketing Funds are spent and that the expenditures do not need to benefit the franchisee directly or be proportionate to their contribution.