Can the Endless Summer Sweets Marketing Fund be used for overhead expenses?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
e.
- 9.3 Marketing Fund. Franchisor may establish a Marketing Fund to promote the System on a local, regional, national, and/or international level. If Franchisor has established a Marketing Fund:
- (a) Separate Account. Franchisor shall hold the Marketing Fund Contributions from all franchisees in one or more bank accounts separate from Franchisor's other accounts.
- (b) Use. Franchisor shall use the Marketing Fund only for marketing, advertising, and public relations materials, programs and campaigns (including at local, regional, national, and/or international level), and related overhead. The foregoing includes such activities and expenses as Franchisor reasonably determines, and may include, without limitation: development and placement of advertising and promotions; sponsorships; contests and sweepstakes; development of décor, trade dress, Marks, and/or branding; development and maintenance of brand websites; social media; internet activities; e-commerce programs; search engine optimization; market research; public relations, media or agency costs; trade shows and other events; printing and mailing; and administrative and overhead expenses related to the Marketing Fund (including the compensation of Franchisor's employees working on marketing and for accounting, bookkeeping, reporting, legal and other expenses related to the Marketing Fund).
- (c) Discretion.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, the Marketing Fund can be used for overhead expenses. Specifically, the FDD states that the Franchisor will use the Marketing Fund for marketing, advertising, and public relations, including related overhead. This means that a portion of the funds contributed by franchisees can be allocated to cover the administrative costs associated with managing the Marketing Fund itself.
The FDD provides examples of activities and expenses that the Marketing Fund may cover, including the development and placement of advertising, sponsorships, contests, website maintenance, social media, market research, and public relations. Importantly, it also explicitly includes administrative and overhead expenses related to the Marketing Fund, such as compensation for Endless Summer Sweets' employees working on marketing, as well as accounting, bookkeeping, reporting, and legal expenses related to the fund.
It's important to note that the expenditures from the Marketing Fund do not need to be proportionate to a franchisee's contributions, nor do they need to provide any direct or indirect benefit to the franchisee. The franchisor has sole discretion over how the Marketing Fund is spent and is not considered a fiduciary with respect to the fund. This means that while franchisees contribute to the fund, Endless Summer Sweets ultimately decides how the money is allocated, including the portion used for overhead expenses.