Can Spray Net use the Brand Development Fund to pay for its general operating expenses?
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).
We are not required to spend any of your Fund Contributions in the Designated Territory you are granted under your Franchise Agreement, and we will provide you with an accounting of the Fund within 120 days after our fiscal year end (upon your written request). We are not required to have the Fund audited, but we may do so and use the Fund Contributions to pay for such an audit. If we do not spend all Fund Contributions in a given year, we may rollover any excess contributions into the Fund for use during the following year. We will have the right to modify or discontinue the Fund, as we deem appropriate in our sole discretion. (Franchise Agreement, Section 9(E)).
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, the Brand Development Fund can not be used for the company's general operating expenses. However, Spray Net can use the fund to cover reasonable salaries, administrative costs, third-party costs, travel expenses, and overhead that they incur while administering the fund and its programs. These programs include conducting market research, preparing advertising, promotion, and marketing materials, and collecting and accounting for Fund contributions.
Spray Net details that the Brand Development Fund is not considered an asset or trust, and they do not owe franchisees any fiduciary obligations related to the fund's maintenance, direction, or administration. The amount spent from the fund in any fiscal year may be more or less than the total contributions for that year. Spray Net can also borrow funds to cover deficits or invest any surplus for future use. Any interest earned on fund contributions will be used to pay costs before using the fund's other assets.
Spray Net will not use the fund to pay for advertising that primarily solicits franchise sales, although they can display the phrase "Franchises Available" on any advertising or marketing covered by the fund. Upon written request, Spray Net will provide franchisees with an unaudited, annual statement of fund collections and costs. Spray Net may also incorporate the fund or operate it through a separate entity if deemed appropriate. Affiliate-owned centers may contribute to the fund but are not obligated to do so.
Spray Net may use fund contributions to cover portions of advertising, marketing, and other campaigns that involve regions where their affiliates have offered and sold franchises, such as Canada. They will typically cover portions of such expenses with the appropriate funds that exist in the regions at issue, if any. Spray Net is not required to spend any of a franchisee's fund contributions in their designated territory and will provide an accounting of the fund within 120 days after their fiscal year end upon written request. Spray Net is not required to have the fund audited but may do so and use fund contributions to pay for such an audit. Any excess contributions in a given year may be rolled over into the fund for use during the following year. Spray Net has the right to modify or discontinue the fund as they deem appropriate in their sole discretion.