Does Extreme Art Studio assume a fiduciary duty to franchisees regarding the Brand Fund?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
We assume no fiduciary duty to you or other direct or indirect liability or obligation to collect amounts due to the Brand Fund or to maintain, direct, or administer the Brand Fund. Any unused funds in any calendar year will be applied to the following year's funds, and we reserve the right to contribute or loan additional funds to the Brand Fund on any terms we deem reasonable.
The Brand Fund is not audited. We will provide an annual unaudited accounting for the Brand Fund that shows how the Brand Fund proceeds have been spent for the previous year upon written request. We did not collect any Brand Fund Contributions during our last fiscal year, ended December 31, 2023.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 27–37)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, Extreme Art Studio does not assume a fiduciary duty to franchisees regarding the Brand Fund. The document explicitly states that Extreme Art Studio has complete discretion on how the Brand Fund will be utilized and is not obligated to spend any amount on advertising in the geographical area where a franchisee is located.
This means that Extreme Art Studio has significant control over the Brand Fund and its expenditures, and franchisees may not have recourse if they disagree with how the funds are spent. The Brand Fund can be used for various marketing and promotional activities, as well as the development of technology for the Extreme Art Studio system. The franchisor can also reimburse itself and its affiliates for expenses associated with the Brand Fund.
Furthermore, Extreme Art Studio provides an annual unaudited accounting of the Brand Fund upon written request, but the Brand Fund itself is not audited. This lack of an independent audit may raise concerns for franchisees about the transparency and accountability of the Brand Fund's management. Franchisees should be aware that Extreme Art Studio is not legally bound to act in their best interests when managing the Brand Fund.