What accounting practices does Deka Lash use for the Brand Fund?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
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ITEM 6 OTHER FEES
| Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty (Notes 1 and 2) | 6% of Gross Studio Sales or $600 per month, whichever is greater. After your 1 st year of operations, the minimum Royalty Fee increases to $1,000 per month. | As specified in the operations manual. Currently we collect royalties twice a month on the 5 th day following the end of each semi-monthly period. | |
| Brand | The greater of 3% of Gross Studio Sales or, after the 1 st year of operations, $500 per month. | As specified in the operations manual. Currently we collect royalties twice a month on the 5 th day following the end of each semi-monthly period. | You are required to contribute the specified Brand Development Fee into the Brand Development Fund (the "Brand Fund"). We are not obligated to maintain the Brand Fund in a separate bank account nor use the entirety of amounts collected within the same calendar year. However, we will account for collections and expenditures and track the Brand Fund balance separately. |
| Development | |||
| Fee | |||
| Technology Fee | $199 per month per executed franchise agreement from date of signing franchise agreement through the date of opening of the studio. $399 per month per franchise location thereafter. | 5 th day of the month for the preceding month, or as specified in the operations manual. | If deemed necessary, we can change monthly fee once a calendar year with 30 days' notice. Any increase would be limited to cover costs of additional software made available to franchisees. |
| Computer & Software Fees | Currently $259/month paid to our vendors | Monthly | You must pay the monthly fee for the POS and other software we specify. This fee may vary based upon optional add-on services that you may select. |
| Minimum Local | Minimum of $2,000 per month. | When due as billed by local advertiser. | If you fail to spend the minimum amount on Local Marketing, we have the right to require you to pay the unspent required balance to the Brand Development Fund. |
Source: Item 6 — OTHER FEES (FDD pages 15–23)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the Brand Fund, which franchisees contribute to via the Brand Development Fee, does not have to be maintained in a separate bank account. The Brand Development Fee is the greater of 3% of Gross Studio Sales or, after the 1st year of operations, $500 per month. Deka Lash is also not obligated to use all of the amounts collected within the same calendar year. However, Deka Lash will account for collections and expenditures and track the Brand Fund balance separately.
For a prospective Deka Lash franchisee, this means that while the funds contributed for brand development are tracked, they may not be held in a dedicated account and can be carried over from year to year. This provides Deka Lash with flexibility in managing the Brand Fund but also means that franchisees should inquire about how the funds are being used and what the long-term plans are for brand development.
It is typical in the franchise industry for franchisors to have some discretion over the Brand Fund, but franchisees usually want assurance that the funds are being used effectively to benefit the entire franchise system. Therefore, a prospective franchisee should ask Deka Lash for detailed information on how the Brand Fund is managed, what types of expenditures are made, and what the strategic goals are for the fund.
Understanding these accounting practices and uses of the Brand Fund is crucial for a franchisee to assess the value and transparency of the franchise system. It is also important to note that franchisees may be required to pay the unspent balance of their local marketing requirement to the Brand Development Fund if they fail to spend the minimum amount on local marketing.