Is Red Wagon Club required to segregate Brand Fund contributions from other funds?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
We are not required to segregate Brand Fund contributions from our other funds, but we will account for contributions to the Brand Fund separately from our other funds and not use the Brand Fund contributions for any of our general operating expenses. However, we may use contributions to the Brand Fund to reimburse us or our affiliates or designees for the reasonable salaries and benefits of personnel who manage and administer or work on the Brand Fund's activities, the Brand Fund's other administrative costs, travel expenses of personnel while they are on Brand Fund business, meeting costs, overhead relating to Brand Fund business, and other expenses that we incur in activities reasonably related to administering or directing the Brand Fund and its programs. While references to the availability of franchises may appear in marketing materials, the Brand Fund will not be used primarily to sell franchises.
Contributions to the Brand Fund will not be our asset, but we do not assume or owe any fiduciary obligation to you in respect of those contributions or for administering the Brand Fund or any other reason. We will hold all Brand Fund contributions for the benefit of the contributors. 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. We will prepare an annual, unaudited statement of Brand Fund collections and expenses and, once prepared, give you the statement for the most recently completed fiscal year upon your written request. We may have the Brand Fund audited annually, at the Brand Fund's expense, by an independent certified public accountant. We may incorporate the Brand Fund or operate it through a separate entity whenever we deem appropriate, in which case the successor entity will have all of the rights and duties we have.
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 is not required to segregate Brand Fund contributions from its other funds. However, Red Wagon Club will account for contributions to the Brand Fund separately and will not use these contributions for general operating expenses. This means that while the funds may not be held in completely separate accounts, Red Wagon Club will maintain separate accounting for the Brand Fund.
Red Wagon Club may use Brand Fund contributions to reimburse itself, its affiliates, or designees for reasonable salaries and benefits of personnel managing the Brand Fund, administrative costs, travel expenses, meeting costs, overhead, and other expenses related to administering the Brand Fund and its programs. While marketing materials may reference franchise availability, the Brand Fund will not be used primarily to sell franchises.
Brand Fund contributions will not be considered an asset of Red Wagon Club, but the company does not assume any fiduciary obligation to franchisees regarding these contributions or the administration of the Brand Fund. Red Wagon Club will hold all Brand Fund contributions for the benefit of the contributors. Red Wagon Club can spend more or less than the total contributions in any fiscal year, borrow funds to cover deficits, or invest any surplus for future use. Interest earned on Brand Fund contributions may be used to pay costs before using other Brand Fund assets.
Red Wagon Club will prepare an annual, unaudited statement of Brand Fund collections and expenses, providing it to franchisees upon written request. The Brand Fund may be audited annually at its own expense by an independent certified public accountant. Red Wagon Club may also incorporate the Brand Fund or operate it through a separate entity, which would then assume all associated rights and duties.