Can the Chocolate Bash Marketing Fund be used for developing trade dress?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
hising has established a Marketing Fund:
- (a) Separate Account. CB Franchising shall hold the Marketing Fund Contributions from all franchisees in one or more bank accounts separate from CB Franchising's other accounts.
- (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.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the Marketing Fund can be used for the development of trade dress. CB Franchising has the discretion to use the Marketing Fund for marketing, advertising, and public relations, which includes the development of trade dress.
This means that franchisee contributions to the Marketing Fund could be used to create and update the overall look and feel of Chocolate Bash locations. This could include interior design, exterior signage, and other elements that contribute to the brand's visual identity. While franchisees contribute to the Marketing Fund, the expenditures from the fund do not need to be proportionate to their contributions, nor do they need to provide any direct or indirect benefit to the franchisee.
CB Franchising has sole discretion over how the Marketing Fund is spent and does not have a fiduciary duty regarding the fund. Franchisees should be aware that they may not have direct control over how their contributions are used, and the franchisor has the final say in these decisions. However, Chocolate Bash 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.