What is the purpose of the 'Brand Fund' for Chocolate Fish Coffee franchises?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
ranchising.
- 9.2 Use by Chocolate Fish Franchising. Chocolate Fish Franchising may use any marketing materials or campaigns developed by or on behalf of Franchisee, and Franchisee hereby grants an unlimited, perpetual, royalty-free license to Chocolate Fish Franchising for such purpose.
- 9.3 Brand Fund. Chocolate Fish Franchising may establish a Brand Fund to promote the System on a local, regional, national, and/or international level. If Chocolate Fish Franchising has established a Brand Fund:
- (a) Separate Account. Chocolate Fish Franchising shall hold the Brand Fund Contributions from all franchisees in one or more bank accounts separate from Chocolate Fish Franchising's other accounts.
- (b) Use. Chocolate Fish Franchising shall use the Brand 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 Chocolate Fish 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 Brand Fund (including the compensation of Chocolate Fish Franchising's employees working on marketing and for accounting, bookkeeping, reporting, legal and other expenses related to the Brand Fund).
- (c) Discretion. Franchisee agrees that expenditures from the Brand Fund need not be proportionate to contributions made by Franchisee or provide any direct or indirect benefit to Franchisee. The Brand Fund will be spent at Chocolate Fish Franchising's sole discretion, and Chocolate Fish Franchising has no fiduciary duty with regard to the Brand Fund.
- (d) Contribution by Other Outlets. Chocolate Fish Franchising is not obligated to (i) have all other Chocolate Fish Coffee businesses (whether owned by other franchisees or by Chocolate Fish Franchising or its affiliates) contribute to the Brand Fund, or (ii) have other Chocolate Fish Coffee businesses that do contribute to the Brand Fund contribute the same amount or at the same rate as Franchisee.
- (e) Surplus or Deficit. Chocolate Fish Franchising may accumulate funds in the Brand Fund and carry the balance over to subsequent years. If the Brand Fund operates at a deficit or requires additional funds at any time, Chocolate Fish Franchising may loan such funds to the Brand Fund on reasonable terms.
- (f) Financial Statement.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the Brand Fund is used to promote the Chocolate Fish Coffee system on various levels. Chocolate Fish Franchising may establish a Brand Fund to promote the System on a local, regional, national, and/or international level. The Brand Fund is used for marketing, advertising, and public relations materials, programs, and campaigns, including related overhead.
The activities and expenses covered by the Brand Fund, as determined reasonably by Chocolate Fish Franchising, may include 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 Brand Fund (including the compensation of Chocolate Fish Franchising's employees working on marketing and for accounting, bookkeeping, reporting, legal and other expenses related to the Brand Fund).
Chocolate Fish Coffee franchisees contribute to this fund, with the Franchise Agreement stating that the franchisee shall pay Chocolate Fish Franchising a contribution to the Brand Fund (the "Brand Fund Contribution") equal to 1% of Franchisee's Gross Sales (or such lesser amount as Chocolate Fish Franchising determines), at the same time as the Royalty Fee. However, expenditures from the Brand Fund do not need to be proportionate to a franchisee's contributions, nor do they need to provide any direct or indirect benefit to the franchisee. Chocolate Fish Franchising retains sole discretion over how the Brand Fund is spent and has no fiduciary duty regarding the Brand Fund.
Chocolate Fish Franchising is not obligated to have all Chocolate Fish Coffee businesses contribute to the Brand Fund, nor are they obligated to have them contribute the same amount or rate as the franchisee. Chocolate Fish Franchising may also accumulate funds in the Brand Fund and carry the balance over to subsequent years, and may loan funds to the Brand Fund if it operates at a deficit. Chocolate Fish Franchising will prepare an unaudited annual financial statement of the Brand Fund within 120 days of the close of Chocolate Fish Franchising's fiscal year and will provide the financial statement to Franchisee upon request.