If Hydrodog receives advertising monies from distributors, and they are not specifically designated for advertising, how can Hydrodog use these payments?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
Under the Franchise Agreement, you authorize us to collect any advertising monies or credits due from any of your distributors or other suppliers and any advertising or other rebates or any discounts from distributors and other suppliers based upon purchases or volume purchases by us and our franchisees (including purchases by you). We have the right to negotiate with suppliers, to obtain price reductions, discounts or rebates based on volume purchases. Unless these suppliers designate these payments specifically for advertising and promotion (in which case we will contribute them to the Marketing Fund), we can use these payments as we see fit. Any amounts contributed to the Marketing Fund will be in addition to all other amounts due or contributed under the Franchise Agreement. The Marketing Fund will not be audited. A statement of monies collected and expenditures made by the Marketing Fund will be prepared annually by us and will be provided to you. Any Marketing Fund contributions not spent in the fiscal year in which they accrue are carried over to the next fiscal year. As the Marketing Fund is not yet established, there have been no expenditures. No Marketing Fund contributions were collected in fiscal year 2024.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 22–30)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, Hydrodog has the authority to collect advertising monies, credits, rebates, or discounts from distributors and suppliers based on the purchases made by Hydrodog and its franchisees. If these payments are not specifically designated for advertising and promotion by the suppliers, Hydrodog can use these funds as they see fit. Any amounts specifically designated for advertising will be contributed to the Marketing Fund, in addition to all other amounts due or contributed under the Franchise Agreement.
This means that Hydrodog has considerable discretion over how these non-designated funds are used. While the FDD does not specify exactly how Hydrodog might use these funds, it implies that they are not necessarily restricted to advertising-related activities. This could potentially benefit Hydrodog, but it also means that franchisees may not directly see the benefits of these funds in terms of marketing or promotion.
It's important to note that the Marketing Fund itself is not audited, although Hydrodog will prepare an annual statement of monies collected and expenditures made by the fund, which will be provided to franchisees. Any unspent Marketing Fund contributions are carried over to the next fiscal year. As of the 2025 FDD, the Marketing Fund was not yet established, so no contributions were collected in fiscal year 2024, and there have been no expenditures. A prospective franchisee should inquire about how Hydrodog intends to use these non-designated advertising monies to better understand the potential impact on the franchise system.