For a Cinnaholic franchise, can the franchisor designate an entity other than themselves to receive the Advertising Fee?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
11.2. Advertising Fund. 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, franchisees must pay an Advertising Fee. This fee is determined by Cinnaholic, but it cannot exceed 2% of the bakery's Gross Sales. The document specifies that this Advertising Fee is paid to Cinnaholic or another entity that Cinnaholic designates. This payment is due weekly, specifically on or before Tuesday, based on the previous week's Gross Sales, and it is paid at the same time as the Royalty Fees.
The Advertising Fee is used for the Advertising Fund, which supports the production or purchase of advertising materials and services on a national, regional, or local level. Cinnaholic has control over how these funds are spent, or this control can be given to another entity designated by Cinnaholic. The purpose of the Advertising Fund is to increase brand recognition and sales for all Cinnaholic bakeries.
Cinnaholic emphasizes that the Advertising Fund is intended to benefit all Cinnaholic bakeries and that there is no obligation to ensure that each bakery benefits in direct proportion to its contributions. The funds can cover all costs associated with maintaining and administering advertising programs, including salaries and overhead incurred by Cinnaholic. This includes expenses related to market research, preparing advertising materials, and other direct and indirect costs. Cinnaholic may also choose to incorporate the Advertising Fund or operate it through a separate entity, which would then assume all rights and duties related to the fund.