Can the Extreme Art Studio Brand Fund borrow money to cover deficits?

According to Extreme Art Studio's 2024 Franchise Disclosure Document, the Brand Fund has the ability to borrow money to cover deficits. Specifically, the Brand Fund may spend more than it receives in contributions during a fiscal year. To cover these deficits, the Brand Fund can borrow from Extreme Art Studio or other sources, provided it pays reasonable interest. This provides flexibility in managing the Brand Fund's finances.

In addition to borrowing, the Brand Fund can also invest any surplus funds for future use. Furthermore, any interest earned on Brand Fund contributions will be used to cover costs before using the Brand Fund's other assets. This suggests a strategy of utilizing interest income to offset expenses, potentially reducing the need to draw on the principal or borrow funds.

This arrangement benefits Extreme Art Studio franchisees by ensuring that marketing and advertising efforts can continue even if current contributions are insufficient. However, franchisees should be aware that the Brand Fund is not audited, although Extreme Art Studio will provide an annual, unaudited statement of collections and expenses upon written request. Franchisees may want to request and review these statements to understand how the Brand Fund is managed and whether borrowing is occurring.