Can Fly Fitness use Brand Fund contributions to defray its general operating expenses?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
The Brand Fund will not be used to defray any of our other general operating expenses. Brand Fund contributions will not be used to solicit new franchise sales; provided however, we reserve the right to include "Franchises Available" or similar language and contact information in advertising produced with Brand Fund contributions.
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, which franchisees contribute to, cannot be used to cover Fly Fitness's general operating expenses. Franchisees are required to contribute 2% of their weekly Gross Revenue to the Brand Fund. Fly Fitness outlets operated by an affiliate or Fly Fitness itself may contribute to the Brand Fund at their discretion, but they are not obligated to do so.
The Brand Fund is used by Fly Fitness to cover costs related to advertising, marketing, and promotional materials, including the development, production, and placement of these materials. It can also be used for marketing seminars, training programs, market research, advertising and public relations agencies, and website development and maintenance. Fly Fitness can also use the Brand Fund to cover its own costs, including personnel and administrative expenses, related to administering and directing advertising efforts.
Fly Fitness retains the right to include "Franchises Available" or similar language with contact information in advertising produced using Brand Fund contributions, even though the Brand Fund cannot be used to solicit new franchise sales directly. The Brand Fund is intended to benefit the Fly Fitness system as a whole, and Fly Fitness is not obligated to ensure that individual franchisees benefit directly or proportionally from the fund's expenditures. An annual unaudited financial statement of the Brand Fund is available to franchisees upon written request.
Fly Fitness may terminate the Brand Fund at any time, but only after all monies have been spent on advertising or promotional purposes, or returned to the contributors without interest, based on their respective contributions. As of December 31, 2023, no Brand Fund contributions were required, made, or expended.