Is Itan obligated to provide a financial accounting of the brand fund?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
t Certificate of Good Standing. All Owners and their spouses must sign a Franchise Owner Agreement.
10. ADVERTISING & MARKETING.
10.1. Brand Fund. We administer a brand and system development fund to promote public awareness of our brand and improve our System. On each royalty fee due date, you must pay us a brand fund fee equal to 2% of Gross Sales for the prior reporting period. We deposit all brand fund fees and noncompliance fees we collect into the fund. We may use the fund to pay for any of the following:
- (a) developing, administering or distributing advertising and marketing materials and programs
- (b) conducting and administering promotions, contests or giveaways;
- (c) public and consumer relations and publicity;
- (d) brand development;
- (e) sponsorships and charitable and non-profit donations and events;
- (f) research and development of technology, products and services;
- (g) website development and search engine optimization;
- (h) development, maintenance and promotion of an ecommerce platform;
- (i) development and implementation of quality control programs and customer satisfaction surveys;
(j) conducting market research;
(k) changes and improvements to the System;
(l) fees and expenses charged by advertising agencies we engage to provide marketing services;
(m) collecting and accounting for brand fund fees and preparing financial accountings of the fund;
(n) any other programs or activities we deem appropriate to promote or improve the System;
(o) legal fees to defend Claims brought against the fund (or against you or other franchisees) based on fund expenditures or activities; and
(p) direct or indirect labor, administrative, overhead and other expenses incurred by us and/or our affiliates relating to any of these activities, including salary, benefits and other compensation of any of our (and any of our affiliate's) officers, employees or independent contractors based on time spent working on any brand fund matters described above.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Itan does have an obligation to provide a financial accounting of the brand fund. Specifically, Itan collects a brand fund fee equal to 2% of Gross Sales from franchisees on each royalty fee due date. These fees, along with any noncompliance fees, are deposited into the brand fund, which Itan then uses for various marketing and system development activities.
Itan retains significant discretion over how the brand fund is managed and spent, including the types of marketing and advertising activities undertaken, as well as the allocation of funds. While Itan has broad authority to use the fund for purposes it deems appropriate to promote or improve the Itan system, it is not a trust and Itan has no fiduciary obligations to franchisees regarding the fund's administration.
Despite this broad discretion, Itan is obligated to provide some level of financial transparency to franchisees. The FDD states that Itan will prepare an annual statement of fund operations, including deposits and disbursements, and make it available to franchisees upon request. This allows franchisees to review how the brand fund is being utilized, even though they may not have direct control over spending decisions. This is a fairly standard practice in franchising, as it balances the franchisor's need for flexibility with the franchisees' interest in understanding how their contributions to the brand fund are being spent.
It is important for prospective Itan franchisees to understand the scope of Itan's discretion over the brand fund and the limitations of their influence on marketing decisions. While the annual statement provides some insight into fund operations, franchisees should be aware that Itan has significant leeway in determining how the fund is used and is not obligated to ensure that expenditures directly benefit franchisees in proportion to their contributions.