For a Cinnaholic franchise, can the Advertising Fund be used to employ advertising agencies?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition to all other amounts required to be paid hereunder, during the term hereof, Franchisee must pay to Franchisor, or such other entity designated by Franchisor, an amount based upon Gross Sales to be designated by Franchisor from time to time, in its sole discretion, provided such amount shall not exceed 2% of Gross Sales (the "Advertising Fee"), which amount shall be used by the Advertising Fund (as such term is hereinafter defined). The Advertising Fee shall be the same for all CINNAHOLIC® franchisees. Payment of the Advertising Fee shall be made on or before Tuesday of each week and be based upon Gross Sales of the Bakery for the preceding week. Advertising Fees shall be paid concurrently with the payment of the Royalty Fees.
The Advertising Fee will be expended for the benefit of Franchisor, Franchisee and all other franchisees or users of the CINNAHOLIC® for the production or purchase of such radio, television, print and/or other advertising materials or services as Franchisor deems necessary or appropriate, in its sole discretion, on a national, regional or local basis (the "Advertising Fund"). The expenditure of such funds for advertising is to be under the control of, and in the discretion of, Franchisor at all times, or such other entities designated by Franchisor. Franchisee understands and acknowledges that the Advertising Fund is intended to maximize and support general public recognition, brand identity, sales and patronage of CINNAHOLIC® Bakeries for the benefit of all CINNAHOLIC® Bakeries and that Franchisor undertakes no obligation to ensure that the Advertising Fund benefits each CINNAHOLIC® Bakery in proportion to its respective contributions. 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.
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 employ advertising agencies. Franchisees must pay an Advertising Fee, which cannot exceed 2% of Gross Sales, to the Franchisor. This Advertising Fee is used for the benefit of the Franchisor, franchisee, and other Cinnaholic users.
The funds are used for the production or purchase of advertising materials or services that the Franchisor deems necessary or appropriate. These advertising efforts can be on a national, regional, or local basis. The Franchisor has control over how the Advertising Fund is spent.
The Advertising Fund can cover various costs, including salaries and overhead incurred by the Franchisor for maintaining, administering, and directing advertising materials, programs, and public relations activities. This includes the costs of preparing and conducting television, radio, magazine, billboard, newspaper, direct response literature, direct mailings, brochures, collateral advertising material, implementing websites, surveys of advertising effectiveness, and other media programs and activities. Employing advertising agencies to assist with these activities is also a permissible use of the Advertising Fund, as well as providing promotional brochures, decals, and other marketing materials.