Does Extreme Art Studio have a fiduciary obligation for administering the Brand Fund?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
We do not have any fiduciary obligation for administering the Brand Fund or for any other reason.
The Brand Fund may spend in any fiscal year more or less than the total Brand Fund Contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use.
We will use all interest earned on Brand Fund Contributions to pay costs before using the Brand Fund's other assets.
- 9.3.6 We will prepare an annual, unaudited statement of Brand Fund collections and expenses, and give you the statement upon written request.
The Brand Fund is not audited.
We will provide an annual accounting for the Brand Fund that shows how the Brand Fund proceeds have been spent for the previous year upon written request.
We may incorporate the Brand Fund or operate it through a separate entity whenever we deem appropriate.
The successor entity will have all of the rights and duties specified in this Section 9.3.
- 9.3.7 The purpose of the Brand Fund is to maximize recognition of the Marks, patronage of Extreme Art Studio Businesses, and the Extreme Art Studio brand generally.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, Extreme Art Studio does not have a fiduciary obligation for administering the Brand Fund. However, Extreme Art Studio will account for the Brand Fund separately from its other funds. Although the Brand Fund is not a trust, Extreme Art Studio will hold all Brand Fund Contributions for the benefit of the contributors and use contributions only for the purposes described in the relevant section of the FDD.
Extreme Art Studio may use the Brand Fund to pay the reasonable salaries and benefits of personnel who manage and administer the Brand Fund, the Brand Fund's other administrative costs, travel expenses of personnel while they are on Brand Fund business, meeting costs, overhead relating to Brand Fund business, and other expenses that Extreme Art Studio incurs in activities reasonably related to administering or directing the Brand Fund and its programs. These activities include conducting market research; public relations; preparing advertising, promotion, and marketing materials; and collecting and accounting for Brand Fund Contributions.
Extreme Art Studio will prepare an annual, unaudited statement of Brand Fund collections and expenses, and give it to franchisees upon written request. The Brand Fund is not audited. The purpose of the Brand Fund is to maximize recognition of the Marks, patronage of Extreme Art Studio Businesses, and the Extreme Art Studio brand generally.