For a Cinnaholic franchise, can the Advertising Fund be used to cover the franchisor's salaries and overhead?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor agrees that all funds contributed to the Advertising Fund may be used to meet any and all costs (including, without limitation, reasonable salaries and overhead incurred by Franchisor) of maintaining, administering, directing and preparing national, regional or local advertising materials, programs and public relations activities including, without limitation, the costs of preparing and conducting television, radio, magazine, billboard, newspaper, direct response literature, direct mailings, brochures, collateral advertising material, implementing websites for Franchisor and/or its franchises, surveys of advertising effectiveness and other media programs and activities, employing advertising agencies to assist therewith and providing promotional brochures, decals and other marketing materials.
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).
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the Advertising Fund can be used to cover reasonable salaries and overhead incurred by the franchisor. Specifically, Cinnaholic franchisees must pay an Advertising Fee not exceeding 2% of Gross Sales, which goes into the Advertising Fund.
The FDD states that the Advertising Fund can cover reasonable salaries and overhead incurred by Cinnaholic for maintaining, administering, directing, and preparing advertising materials. This includes costs related to creating advertising programs, public relations, websites, surveys, and employing advertising agencies. The fund can also cover costs related to market research, preparing promotional materials, and legal and accounting fees.
Furthermore, the Advertising Fund is established as a separate banking account, and its monies are accounted for separately from Cinnaholic's other funds. While the fund cannot be used for Cinnaholic's general operating expenses, it can cover reasonable salaries, administrative costs, and overhead related to administering the Advertising Fund and its advertising programs. This includes direct and indirect expenses incurred by Cinnaholic in connection with programs funded by the Advertising Fund.