FRANCHISE ADVERTISING FUND

Beginning a new franchise can be extremely challenging, making the professional advice of a franchise lawyer invaluable.

Contact Neufeld Legal PC for franchising legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

A franchise system's advertising fund (marketing fund) is a collective pool of money contributed by franchisees and managed by the franchisor to finance system-wide marketing and promotional activities. The value of such system-wide marketing of the franchise's commercial offerings is a major selling feature to franchisees, with the prior expenditures of the franchise advertising fund have developed the franchise's brand and being a major selling point to new franchisees, while striving to maintain the franchise system's commercial appeal with customers of the franchise.

• Purpose of the Franchise Advertising Fund: To build, promote, and enhance the overall brand recognition and goodwill of the franchise system, ultimately driving customer traffic and sales for all franchisees. This allows the system to run large-scale campaigns that individual franchisees couldn't afford on their own.

• Funding of the Franchise Advertising Fund: Contributions are typically mandatory and outlined in the franchise agreement. They are usually calculated as a percentage of a franchisee's gross sales (commonly between 1% and 4%), though sometimes a flat fee is used.

• Usage of the Franchise Advertising Fund: The funds are used for expenses that benefit the system as a whole, which can include:

  • National, regional, and sometimes local advertising campaigns (TV, radio, print, digital, social media).

  • Development of creative materials and marketing content.

  • Public relations and brand-building initiatives.

  • Market research.

  • Costs of administering and auditing the fund.

• Administration of the Franchise Advertising Fund: The fund is managed by the franchisor, usually in a separate, dedicated account to ensure the money is not co-mingled with the franchisor's general operating funds.

• Transparency of the Franchise Advertising Fund: Franchisors are typically required to disclose information about the advertising fund, including contributions, uses, and an annual financial statement, in their Franchise Disclosure Document (FDD).

Christopher Neufeld is a business lawyer knowledgeable in the rigors and challenges of the franchise business, together with the legal constructs that are critical to their effective operation. For experienced legal representation in starting, acquiring / selling, operating and managing a franchise, contact franchisee lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.

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Key Aspects of a Franchise Disclosure Document: A Franchise Disclosure Document is a crucial legal document in Canada that provides a prospective franchisee with essential information about a franchise system. The franchise disclosure document is intended to help the potential franchisee make an informed investment decision. Read more.

 

Key Aspects of a Franchise Agreement: A franchise agreement is a legally binding contract that governs the relationship between a franchisor and a franchisee, which is drafted strongly in favour of the franchisor (as they are in a position to heavily dictate the franchise arrangement that they offer to prospective franchisees). While the specifics can vary, there are several key aspects that are almost always included. Read more.

 

Contact us via email at chris@neufeldlegal.com or call 403-400-4092 / 905-616-8864.