For a Cinnaholic franchise, is the Advertising Fund maintained in a separate banking account?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
The Advertising Fund shall be established as a separate banking account and monies received shall be accounted for separately from Franchisor's other funds and shall not be used to defray any of Franchisor's general operating expenses, except for such reasonable salaries, administrative costs and overhead as Franchisor may incur in activities reasonably related to the administration or direction of the Advertising Fund and its advertising programs (including, without limitation, conducting market research, preparing advertising and promotional materials, collecting and accounting for contributions to the Advertising Fund, paying for the preparation and distribution of financial statements, legal and accounting fees and expenses, taxes, and other reasonable direct and indirect expenses incurred by Franchisor or its authorized representatives in connection with programs funded by the Advertising Fund).
The Advertising Fund will not be Franchisor's asset.
A financial statement of the operations of the Advertising Fund shall be prepared annually, and shall be made available to Franchisee upon request.
Franchisor may spend in any fiscal year more or less than the aggregate contribution of all CINNAHOLIC® Bakeries to the Advertising Fund in that year, and the Advertising Fund may borrow from Franchisor or others to cover deficits or invest any surplus for future use.
Any lender loaning money to the Advertising Fund shall receive interest at a reasonable rate.
All interest earned on monies contributed to the Advertising Fund will be used to pay advertising costs before other assets of the Advertising Fund are expended.
Franchisor may cause the Advertising Fund to be incorporated or operated through a separate entity at such time as Franchisor may deem appropriate, and such successor entity, if established, will have all rights and duties specified in this Section.
Franchisor will not be liable for any act or omission with respect to the Advertising Fund that is consistent with this Agreement and done in good faith.
Except as expressly provided in this Section 11.2, Franchisor assumes no direct or indirect liability or obligation to Franchisee with respect to the maintenance, direction or administration of the Advertising Fund.
Franchisee acknowledges and agrees that Franchisor is not operating or acting as a trustee or fiduciary with respect to the Advertising Fees collected.
Franchisee agrees to participate in any promotion, marketing or advertising campaigns created by the Advertising Fund.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the Advertising Fund must be established as a separate banking account. This means that the money collected for advertising purposes is kept separate from Cinnaholic's general operating funds. These advertising funds cannot be used for the franchisor's general operating expenses, but can be used for reasonable salaries, administrative costs, and overhead that Cinnaholic incurs while administering the Advertising Fund and its advertising programs. These activities include market research, preparing advertising and promotional materials, collecting and accounting for contributions, paying for financial statements, legal and accounting fees, taxes, and other reasonable expenses related to the advertising programs.
The FDD specifies that the Advertising Fund will not be considered Cinnaholic's asset. A financial statement detailing the Advertising Fund's operations will be prepared annually and made available to franchisees upon request. Cinnaholic has the option to spend more or less than the total contributions from all Cinnaholic bakeries in any given year. The Advertising Fund can also borrow money from Cinnaholic or other sources to cover deficits or invest any surplus for future use. Any loans to the Advertising Fund will accrue interest at a reasonable rate.
Furthermore, all interest earned on the Advertising Fund monies will be used to cover advertising costs before any other assets of the fund are used. Cinnaholic retains the right to incorporate the Advertising Fund or operate it through a separate entity if deemed appropriate, with such entity assuming all rights and duties outlined in the agreement. Cinnaholic will not be held liable for actions related to the Advertising Fund that are consistent with the agreement and done in good faith. Franchisees acknowledge that Cinnaholic is not acting as a trustee or fiduciary concerning the collected Advertising Fees and must participate in any promotion, marketing, or advertising campaigns created by the Advertising Fund.