Franchise Advertising Fund Disputes: What Business Owners Can Do

Many franchisees pay required advertising or marketing fees every week. In theory, those fees support brand-wide advertising, marketing programs, and customer development. But when franchisees cannot tell how the money is being spent, or when the franchisor refuses to provide meaningful information, a business issue can quickly become a legal dispute.

That is the core issue in PJC Management Group, LLC v. MAACO Franchisor SPV LLC, 2026 NCBC 37, a recent decision from the North Carolina Business Court. The plaintiffs were MAACO franchisees who collectively operated nearly fifty franchises. They alleged that MAACO reduced advertising spending, increased administrative charges, failed for years to provide required annual statements of advertising receipts and disbursements, and eventually produced financial information that still did not explain where the franchisees’ marketing fees had gone. The Court allowed the franchisees’ contract-based claims against MAACO to proceed, but dismissed several other claims, including the unfair and deceptive trade practices claim under N.C.G.S. § 75-1.1.

Franchise Advertising Fund Disputes: What Business Owners Can Do

The decision matters because advertising fund disputes are common in franchise systems. Franchisees often have little control over brand-level marketing, even though they are required to contribute to it. Franchisors, on the other hand, usually have broad discretion to decide how advertising funds are spent. That discretion can include decisions about media strategy, vendors, administrative expenses, and market priorities.

But discretion is not the same thing as a blank check. If the franchise agreement says marketing fees must be used for particular purposes, or requires the franchisor to provide annual statements showing receipts and disbursements, those provisions are enforceable. In this case, the franchisees were not simply complaining that MAACO made poor advertising decisions. They alleged in their complaint filed with the Court that MAACO used advertising funds for purposes unrelated to advertising or marketing and failed to provide information the franchise agreements required. At the motion to dismiss stage, under Rule 12(b)(6) of the Rules of Civil Procedure, that was enough to allow the breach of contract claim to move forward.

The ruling also shows why the factual record matters. The franchisees pointed the Court to reduced advertising expenditures, years of unanswered requests for required statements, unexplained transactions in the data MAACO eventually produced, and allegedly improper charges. Those details helped move the claim beyond general criticism about disappointing marketing results, or speculation about what the franchisor might otherwise be doing. For business owners, that distinction is critical. Frustration is not the same thing as a basis for a lawsuit. A lawsuit needs contract language, documents, dates, requests, responses, and facts that support a reasonable inference of breach.

The Court was less receptive to the franchisees’ unfair and deceptive trade practices claim, however. North Carolina law does not treat every breach of contract as an unfair or deceptive act under the Unfair and Deceptive Trade Practices Act, N.G.S.S. § 75-1.1. Even an intentional breach usually is not enough. A plaintiff must generally show substantial aggravating circumstances beyond the breach itself. Here, the Court held that MAACO’s alleged failure to provide required information was still a contract-performance dispute. The complaint did not allege that MAACO destroyed records, provided false information, or took some other affirmative deceptive act to prevent the franchisees from investigating.

The Court also dismissed the claims against MAACO’s parent-company guarantors, at least for now. The problem was not that guarantor liability could never exist. The problem was that the complaint did not plead that theory with enough specificity. Naming related companies is not enough. A plaintiff must explain what each defendant allegedly did, what obligation it breached, and why the claim is ripe.

For franchisees, the practical point is to build the record early. Request required financial disclosures in writing. Tie those requests to the franchise agreement. Preserve the franchisor’s responses, or lack of responses. Separate complaints about business judgment from actual contractual violations.

For franchisors, the message is just as direct. Advertising fund transparency is not only a relationship issue. If the franchise agreement requires reporting or limits how marketing fees may be used, those obligations should be treated as legal obligations, not customer-service preferences.

Franchise systems depend heavily on trust. When franchisees are required to pay ongoing marketing fees, they need confidence that those funds are being used consistently with the contract. PJC Management reinforces a practical rule that applies well beyond the franchise industry: the strongest business disputes are built from the agreement, the paper trail, and a clear explanation of how the other side failed to do what it promised.

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Dye Culik is a business and franchise law firm located in Charlotte, North Carolina. We work with franchisors and franchisees to structure a franchise relationship that works for all parties and protects business interests. Contact us and mention this article for a complimentary consultation.