Can the Chocolate Bash Marketing Fund be used at the local level?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
If CB Franchising 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. 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.
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 marketing, advertising, and public relations at the local, regional, national, and/or international level. This means that Chocolate Bash has the discretion to allocate the funds collected from franchisees for marketing activities that may or may not directly benefit each individual franchisee.
Chocolate Bash may also establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative exists for the franchisee's location when they start operating, they must immediately become a member. If a Market Cooperative is created later, the franchisee must join within 30 days. Chocolate Bash will not require a franchisee to be part of more than one Market Cooperative.
Each Market Cooperative's activities will be decided by a majority vote of its members, unless the members can't agree, in which case Chocolate Bash can make the decision after giving 10 days' notice. The purpose of each Market Cooperative is to manage regional advertising and marketing programs and create standardized promotional materials for local advertising, subject to Chocolate Bash's approval. This indicates that while the Marketing Fund can be used at various levels, there's also a mechanism for more localized marketing efforts through Market Cooperatives, allowing franchisees some input into how marketing funds are spent in their specific area.
It's important to note that Chocolate Bash has sole discretion over how the Marketing Fund is spent and has no fiduciary duty regarding the fund. This means that franchisees do not have control over how the Marketing Fund is used, and Chocolate Bash is not legally obligated to use the funds in a way that directly benefits the franchisees. Franchisees should consider that expenditures from the Marketing Fund need not be proportionate to contributions made by the Franchisee or provide any direct or indirect benefit to the Franchisee.