Can the Hydrodog Marketing Fund borrow money to cover deficits?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
We may spend on behalf of the Marketing Fund, in any fiscal year an amount greater or less than the aggregate contribution of all the HydroDog Businesses to the Marketing Fund in that year, and the Marketing Fund may borrow from us or others to cover deficits or invest any surplus for future use.
In addition to other Marketing Fund fees, we may assess you, and you must pay to the Marketing Fund such Marketing Fund fees as we or the Fund deems necessary to address any deficits or special needs of the Marketing Fund.
All interest earned on monies contributed to the Marketing Fund will be used to pay System Development costs before other assets of the Marketing Fund are expended.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, the Marketing Fund has the ability to borrow money to cover deficits. Specifically, Hydrodog may spend more than the aggregate contributions from all HydroDog businesses in a fiscal year. To cover these deficits, the Marketing Fund may borrow from Hydrodog or other sources. Conversely, the fund can also invest any surplus for future use.
This clause provides Hydrodog with flexibility in managing the Marketing Fund. It allows them to undertake marketing initiatives even if current contributions are insufficient, potentially boosting brand awareness and benefiting franchisees. However, it also introduces a risk for franchisees. Hydrodog can assess additional Marketing Fund fees to address deficits or special needs, meaning franchisees could be required to contribute more than the standard percentage of gross sales.
Furthermore, all interest earned on monies contributed to the Marketing Fund will be used to pay System Development costs before other assets of the Marketing Fund are expended. This means that interest earned on the fund will first be allocated to system development before being used for other marketing purposes. Prospective franchisees should inquire about the frequency and potential size of these additional assessments and how the franchisor plans to manage the Marketing Fund to minimize the need for borrowing and additional fees. Understanding the historical performance of the fund and its management practices is crucial for assessing the financial implications for franchisees.