Is Mr. Sandless obligated to ensure that Advertising Fund expenditures are proportionate to payments by franchisees in a specific geographic area?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
We have no obligation to make sure that expenditures of the Advertising Fund in or affecting any geographic area are proportionate or equivalent to payments to the Advertising Fund by franchisees operating in that geographic area, or that any Business will benefit directly or in proportion to the Advertising Fees paid for the development of advertising and marketing materials or the placement of advertising. While we do not anticipate that any part of Advertising Fund contributions will be used for advertising which is principally a solicitation for franchisees, we reserve the right to use the Advertising Fund for public relations or recognition of our brand, for the creation and maintenance of a portion of our Website to be used to explain the franchise offering and solicit potential franchisees, and to include a notation in any advertisement indicating "Franchises Available."
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 19–25)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, Mr. Sandless is not obligated to ensure that advertising fund expenditures in any geographic area are proportionate or equivalent to the payments made by franchisees in that area. This means that franchisees may contribute to the Advertising Fund without necessarily seeing a direct or proportional benefit in their specific geographic location. Mr. Sandless retains the discretion to allocate the Advertising Fund as it sees fit to maximize general public recognition of the Mr. Sandless brand.
Mr. Sandless retains sole discretion over how the Advertising Fund is spent, including creative concepts, materials, media used, and their placement. The company can use the fund for national, regional, and local advertising, publicity, promotion, market research, seminars, training programs, and electronic advertising campaigns. Mr. Sandless can also use the Advertising Fund for public relations, brand recognition, website maintenance, and even to solicit potential franchisees.
Mr. Sandless also has the right to reimburse itself from the Advertising Fund for costs associated with developing, producing, and distributing advertising materials, as well as collecting the Advertising Fee, including legal and accounting fees. While businesses owned by Mr. Sandless or its affiliates contribute to the fund on the same basis as franchisees, the funds are kept separate from Mr. Sandless's general operating expenses. Any unspent funds are carried over to the following year, and Mr. Sandless will provide an annual, unaudited statement of funds collected and costs incurred upon written request. In the most recent fiscal year ending December 31, 2024, Mr. Sandless spent 100% of the Advertising Fund on Online Advertising on Google and YouTube, Yahoo and Bing for customer leads for our owners.
This arrangement is fairly typical in franchising, where advertising funds are often used to promote the brand as a whole, rather than directly benefiting individual franchisees in proportion to their contributions. Prospective franchisees should consider this when evaluating the potential return on their advertising fee contributions.