Under what conditions can Fly Fitness terminate the Brand Fund?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
The Brand Fund collects and expends the Brand Fund contributions for the benefit of the System as a whole. We reserve the right to use the Brand Fund contributions to place advertising in national, regional, or local media (including broadcast, print, or other media) and to conduct marketing campaigns through any channel, in our discretion, including but not limited to, Internet and directmail campaigns. We have no obligation, however, to place advertising or conduct marketing campaigns in any particular area, including the Territory where your Franchised Business is located. The Brand Fund and its earnings shall not otherwise inure to our benefit except that any resulting technology and intellectual property shall be deemed our property.
We have no obligation to make expenditures that are equivalent or proportionate to your Brand Fund contribution or to ensure that you benefit directly or pro rata from the production or placement of advertising from the Brand Fund.
The Brand Fund is not audited. An annual unaudited financial statement of the Brand Fund is available to any franchisee upon written request.
If we spend more or less than the total of all contributions to the Brand Fund in any fiscal year, we may carry-forward any surplus or deficit to the next fiscal year.
As of our fiscal year ended December 31, 2023, no Brand Fund contributions were required, made, or expended. Although the Brand Fund is intended to be of perpetual duration, we may terminate it at any time and for any reason or no reason. We will not terminate the Brand Fund, however, until all monies in the Brand Fund have been spent for advertising or promotional purposes or returned to contributors, without interest, on the basis of their respective contributions.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 22–29)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the Brand Fund is intended to be of perpetual duration. However, Fly Fitness reserves the right to terminate the Brand Fund at any time and for any reason, or no reason at all. This gives Fly Fitness broad discretion over the Brand Fund's existence.
However, there is a stipulation regarding the termination of the Brand Fund. Fly Fitness is obligated to ensure that all monies within the Brand Fund are utilized for advertising or promotional purposes before termination. Alternatively, any remaining funds must be returned to the contributors, without interest, based on their respective contributions. This provides some assurance to franchisees that their contributions will be used as intended or returned.
This condition ensures that franchisees' contributions are either used for the intended advertising and promotional activities or are returned to them, preventing Fly Fitness from simply dissolving the fund and retaining the remaining balance. While Fly Fitness has the right to terminate the fund at any time, this obligation provides a layer of protection for franchisees who contribute to the Brand Fund.