Can the Degree Wellness brand development fund be used to pay for general operating expenses?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
The Fund will be accounted for separately from our other funds and will not be used to pay any of our general operating expenses, except for salaries, administrative costs, and overhead that we incur in activities reasonably related to the administration of the Fund and its marketing programs, including 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 aggregate contributions to the Fund in that year, and the Fund may borrow from us or other lenders to cover the Fund's deficits or invest any surplus for future use by the Fund. We will prepare an annual unaudited statement of monies collected and costs incurred by the Fund and will provide it to you upon written request. A franchisee may request an annual report of general category spending of the Fund. This report may be requested in writing and will be provided in the manner we determine no more than one time per year and only after March 1 for the prior year. There is no history of a prior fiscal year to disclose in this disclosure document.
Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 32–42)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the brand development fund is primarily for marketing and promotional activities. While Degree Wellness will account for the fund separately from its other funds, it can use the fund to cover salaries, administrative costs, and overhead related to administering the fund and its marketing programs. This includes preparing advertising and marketing materials, as well as collecting and accounting for contributions to the fund.
Degree Wellness maintains control over the fund's administration and has the discretion to determine the creative concepts, materials, and media used. They also decide on the geographic and market allocation of the fund. The fund can be used to cover various costs related to advertising and marketing, such as television, radio, magazine, billboard, newspaper, and internet programs. It can also cover costs associated with marketing research, website development, and social media activities.
Degree Wellness can suspend or terminate the fund, and any unspent monies will be distributed to Degree Wellness, its affiliates, and franchisees in proportion to their contributions over the preceding 12 months. Franchisees can request an annual report of general category spending of the fund, but only once per year and after March 1 for the prior year. Degree Wellness emphasizes that it assumes no direct or indirect liability in connection with the fund's operation and will not act as a fiduciary.
For a prospective Degree Wellness franchisee, this means that while a portion of their gross revenue (1%, potentially increasing to 2%) goes into the brand development fund, those funds are primarily intended to enhance the overall image and recognition of the Degree Wellness system. While Degree Wellness has some leeway to use the fund for administrative expenses directly related to marketing, the fund is not meant to cover the franchisor's general operating costs unrelated to these activities. Franchisees should be aware that Degree Wellness has significant control over how the fund is spent and is not obligated to ensure that every franchisee benefits directly or proportionally from the fund's expenditures.