Is the Cordova Brand Development Fund considered a trust?

According to Cordova's 2025 Franchise Disclosure Document, the Brand Development Fund is explicitly not a trust. The FDD states that Cordova is not a trustee or fiduciary of the Brand Development Fund. Furthermore, Cordova is allowed to deposit and maintain the Brand Development Fund fees in its general accounts, and these fees are not required to be segregated from Cordova's other assets or accounts.

This arrangement gives Cordova significant flexibility in managing the Brand Development Fund. Unlike a trust, where funds must be managed strictly for the benefit of the beneficiaries (in this case, the franchisees), Cordova has more discretion in how the funds are used. This means Cordova can use the funds for a broader range of activities, and is not necessarily obligated to use the funds in a way that directly benefits each franchisee in proportion to their contribution.

For a prospective Cordova franchisee, this means that the contributions to the Brand Development Fund are not held in a protected trust. While the funds are intended to enhance the System brand, Cordova has considerable leeway in deciding how the money is spent. Franchisees should be aware that their contributions might not directly benefit their specific location or market, and they have limited control over how the funds are used. It is important to consider this level of control and the potential impact on their business when evaluating the Cordova franchise opportunity.

This type of arrangement is not uncommon in franchising, but it's crucial for franchisees to understand the implications. Franchisees should inquire about the fund's governance, how the budget is determined, and what measures are in place to ensure the funds are used effectively to support the brand and the franchise system as a whole.