Can the Degree Wellness advertising fund be used for general operating expenses?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
The Fund will be accounted for separately from other funds of Degree Wellness, and will not be used to defray any of our general operating expenses, except for any reasonable salaries, administrative costs, and overhead we may incur in activities reasonably related to the administration of the Fund and its advertising programs (including without limitation conducting market research, preparing advertising and marketing materials, and collecting and accounting for contributions to the Fund). We may spend in any fiscal year an amount greater or less than the total contributions to the Fund in that year. We may cause the Fund to borrow from us or other lenders to cover deficits of the Fund, or to invest any surplus for future use by the Fund. You authorize us to collect for remission to the Fund any advertising monies or credits offered by any supplier to you based upon purchases you make. We will prepare an annual, unaudited statement of monies collected and costs incurred by the Fund and will make it available to you on written request.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the advertising fund will be accounted for separately from other funds of Degree Wellness. The document specifies that the fund will not be used to defray any of Degree Wellness's general operating expenses. However, there is an exception for reasonable salaries, administrative costs, and overhead that Degree Wellness may incur in activities reasonably related to the administration of the fund and its advertising programs. These activities include conducting market research, preparing advertising and marketing materials, and collecting and accounting for contributions to the fund.
This means that while the bulk of the advertising fund must be used for actual advertising and promotional activities, Degree Wellness can use a portion of the fund to cover the costs of managing the fund itself. This is a fairly standard practice in franchising, as there are administrative tasks involved in managing and allocating advertising funds.
For a prospective Degree Wellness franchisee, this is important to understand because it clarifies how their contributions to the advertising fund will be used. While franchisees want their money to go towards advertising that benefits their business, it is also reasonable for the franchisor to use some of the funds to cover administrative costs. The FDD specifies that Degree Wellness will prepare an annual, unaudited statement of monies collected and costs incurred by the Fund and will make it available to franchisees on written request, allowing franchisees to monitor the fund's usage.