Does Spray Net owe franchisees fiduciary obligations because of maintaining, directing or administering the Brand Development Fund?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
We will account for the Fund contributions separately from our other funds and not use the Fund for any of our general operating expenses, except to compensate us for the reasonable salaries, administrative costs, third-party costs, travel expenses and overhead we incur in administering the Fund and its programs, including conducting market research, preparing advertising, promotion, and marketing materials, and collecting and accounting for Fund contributions. The Fund is not our asset or a trust, and we do not owe you fiduciary obligations because of our maintaining, directing or administering the Fund or any other reason. The Fund may spend in any fiscal year more or less than the total Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We will use interest earned on Fund contributions to pay costs before spending the Fund's other assets. We will not use Fund contributions for advertising that principally is a solicitation for the sale of franchises, except that we may use/display the phrase "Franchises Available" on any and all advertising/marketing that is covered by the Fund. We will prepare an unaudited, annual statement of Fund collections and costs and give it to you upon written request. We may incorporate Fund or operate it through a separate entity if we deem appropriate. Our affiliate-owned Centers may, but will not be obligated to, contribute to the Fund if and when established. We may use Fund Contributions to cover portions of advertising, marketing and other campaigns that involve other regions where our affiliates have offered and sold franchises (currently, Canada), and will typically cover portions of such expenses with the appropriate Fund(s) that exist in the region(s) at issue (if any).
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 38–49)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, Spray Net does not owe franchisees fiduciary obligations related to the Brand Development Fund. The FDD explicitly states that the fund is not considered a trust or an asset belonging to the franchisees. Spray Net maintains control over the fund's administration and direction without incurring fiduciary responsibilities.
Spray Net can use the Brand Development Fund to cover reasonable salaries, administrative costs, third-party expenses, travel, and overhead related to administering the fund and its programs. These programs include market research, advertising, promotions, and collecting fund contributions. The company can spend more or less than the total contributions in a fiscal year, borrow funds to cover deficits, or invest any surplus for future use. Interest earned on fund contributions will be used to pay costs before using the fund's other assets.
Spray Net is not obligated to spend any of a franchisee's fund contributions specifically in their designated territory. Franchisees can request an annual statement of fund collections and costs in writing. Spray Net also has the right to modify or discontinue the fund at its discretion. This arrangement is typical in franchising, where franchisors manage advertising funds but usually avoid fiduciary duties to maintain control and flexibility over marketing strategies.