Can Healthsource Chiropractic use the Ad Fund to defray general operating expenses?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
The Ad Fund will be accounted for separately from other funds of HealthSource Chiropractic, and will not be used to defray any of our general operating expenses, except for any reasonable salaries, administrative costs, and overhead we may incur in activities reasonably related to the administration of the Ad Fund and its advertising programs (including without limitation conducting market research, preparing advertising and marketing materials, and collecting and accounting for contributions to the Ad Fund). We may spend in any fiscal year an amount greater or less than the total contributions to the Ad Fund in that year. We may cause the Ad Fund to borrow from us or other lenders to cover deficits of the Ad Fund, or to invest any surplus for future use by the Ad Fund. You authorize us to collect for remission to the Ad Fund any advertising monies or credits offered by any supplier to you based upon purchases you make. We will prepare an annual, unaudited statement of monies collected and costs incurred by the Ad Fund and will make it available to you on written request.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to Healthsource Chiropractic's 2025 Franchise Disclosure Document, the Ad Fund, which franchisees contribute 2% of their gross revenues to, will be accounted for separately from other funds of HealthSource Chiropractic. While the Ad Fund is primarily for advertising, promotional, and marketing expenses, HealthSource Chiropractic can use it to cover reasonable salaries, administrative costs, and overhead related to administering the Ad Fund and its advertising programs. These activities include market research and preparing advertising materials.
HealthSource Chiropractic has discretion over the advertising programs financed by the Ad Fund, including creative concepts, media, and geographic placement. The document states that HealthSource Chiropractic is entitled to direct all advertising programs financed by the Ad Fund, with sole discretion over (i) the creative concepts, materials, endorsements, and media used therein, and (ii) the geographic, market, and media placement and allocation of the programs. This means franchisees may not have direct control over how their contributions are spent, but the funds must generally support the HealthSource Chiropractic brand.
An annual, unaudited statement of monies collected and costs incurred by the Ad Fund will be available to franchisees upon written request. This provides a degree of transparency, allowing franchisees to see how the Ad Fund is being managed. HealthSource Chiropractic can spend more or less than the total contributions to the Ad Fund in any fiscal year and may borrow or invest funds to cover deficits or surpluses. This flexibility allows HealthSource Chiropractic to manage the Ad Fund strategically over time.