Can Red Wagon Club use Brand Fund contributions for general operating expenses?
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 states that it will account for contributions to the Brand Fund separately and will not use these contributions for its general operating expenses.
Red Wagon Club may use Brand Fund contributions to reimburse itself, its affiliates, or designees for specific expenses. These include reasonable salaries and benefits for personnel managing the Brand Fund, administrative costs, travel expenses of personnel on Brand Fund business, meeting costs, overhead related to Brand Fund business, and other expenses incurred in 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.
While Brand Fund contributions are not considered Red Wagon Club's assets, the document specifies that Red Wagon Club 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. The document also states that Red Wagon Club may 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 the Brand Fund's other assets.
Red Wagon Club will prepare an annual, unaudited statement of Brand Fund collections and expenses, providing it to franchisees upon written request for the most recently completed fiscal year. Red Wagon Club may also have the Brand Fund audited annually by an independent certified public accountant at the Brand Fund's expense. Furthermore, Red Wagon Club reserves the right to incorporate the Brand Fund or operate it through a separate entity, in which case the successor entity will assume all rights and duties related to the Brand Fund.