Can the Chocolate Bash Marketing Fund be used for overhead expenses?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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.
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 overhead expenses. CB Franchising has the authority to use the Marketing Fund for marketing, advertising, and public relations purposes, which includes related overhead costs. This fund is designed to support various marketing activities at the local, regional, national, and international levels.
The types of activities and expenses that the Chocolate Bash Marketing Fund can cover are broad. These include the development and placement of advertising and promotions, sponsorships, contests, the creation and maintenance of brand websites, social media activities, e-commerce programs, search engine optimization, market research, public relations, media or agency costs, trade shows, printing, and mailing. Importantly, the fund can also be used for administrative and overhead expenses related to the Marketing Fund itself, including employee compensation for those working on marketing, as well as accounting, bookkeeping, reporting, and legal expenses.
Chocolate Bash franchisees should note that the franchisor, CB Franchising, has sole discretion over how the Marketing Fund is spent, and these expenditures do not need to be proportionate to the contributions made by individual franchisees or provide any direct benefit to them. CB Franchising is also not obligated to ensure that all Chocolate Bash businesses contribute to the Marketing Fund or contribute at the same rate. While CB Franchising will provide an unaudited annual financial statement of the Marketing Fund to franchisees upon request, franchisees have limited control over how the fund is managed and spent.
This arrangement is fairly typical in franchising, where franchisors often control marketing funds to ensure brand consistency and broad promotional efforts. However, it's crucial for prospective Chocolate Bash franchisees to understand that they contribute to a fund over which they have little direct control, and the benefits they receive may not directly correlate with their contributions.