Can Red Wagon Club borrow funds to cover deficits in the Brand Fund?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
We may spend in any fiscal year on Brand Fund activities more or less than the total Brand Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We may use all interest earned on the Brand Fund contributions to pay costs before using the Brand Fund's other assets.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 24–31)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, Red Wagon Club has the ability to borrow funds to cover deficits in the Brand Fund. The Brand Fund is used to promote awareness of the Red Wagon Club brand and RWC Businesses.
Specifically, Red Wagon Club may spend more on Brand Fund activities in a fiscal year than the total contributions received. To cover these deficits, Red Wagon Club can borrow from themselves or other sources, and they will pay reasonable interest on these borrowed funds. Conversely, if there is a surplus in the Brand Fund, Red Wagon Club can invest it for future use. Any interest earned on Brand Fund contributions can be used to cover costs before using the Brand Fund's other assets.
This arrangement means that franchisees may benefit from continued brand promotion even if current contributions are insufficient to cover expenses. However, it also implies that the Brand Fund could incur debt, which would need to be repaid from future contributions. Red Wagon Club will provide an annual, unaudited statement of Brand Fund collections and expenses to franchisees upon written request, and may choose to have the Brand Fund audited annually by an independent certified public accountant at the Brand Fund's expense.