The majority of Franchisors have a National Marketing Fund into which their Franchisees make a compulsory contribution, usually monthly by a specific date, referred to as a Marketing Contribution or Marketing Fee, which is used to develop and strengthen their brand. The Marketing Fund is governed by the franchise agreement and is regulated by the Consumer Protection Act 68 of 2008.
The Franchisor determines whether to have full control of the decision making and the spending of the funds or to include the Franchisees in this decision. In terms of the Consumer Protection Act, the following must be adhered to:
- The Marketing Fund must have its own bank account into which the Franchisees contribute and for transparency, the Franchisor must provide the Franchisees with a copy of an audited financial statement which reflects the Marketing Fund’s receipts and expenses for the last financial year, within three months after the end of the last financial year.
- The audited financial statement must be accompanied by a certificate of a registered accountant or accounting officer, as the case may be, confirming that the fund’s account has been audited and that the statements, to the best of his/her knowledge, provide a true reflection of the financial matters relating to the fund.
- The Franchisor is obliged to make financial management accounts relating to the Marketing Fund available to the Franchisees every 3 (three) month period.
- Contributions made to the Marketing Fund by the Franchisees may not be used to provide any benefit to the Franchisor which is not also available to all of the Franchisees of the Franchisor.
- The Marketing Fund contributions may only be used for purposes of building and strengthening the brand and not for the advertising for new Franchisees.
Does your National Marketing Fund meet all the above points and are they all included in your Franchise Agreement? If not, be sure to rectify this as you may be in contravention of the Consumer Protection Act 68 of 2008.
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