AO 2012-12: Corporation may solicit affiliated individual franchisees for contributions to SSF

Dunkin’ Brands, Inc. may solicit contributions to its separate segregated fund (SSF) from the executive and administrative personnel of both its corporate and non-corporate franchisees/licensees. Dunkin Brands, Inc. controls the business policies and practices of its franchisees to such an extent that those franchisees are considered affiliated with Dunkin’ Brands and therefore the executive and administrative personnel may be solicited for contributions to Dunkin’ Brands’ SSF.

Background

Dunkin’ Brands, Inc. is a franchisor of two restaurant chains: Dunkin’ Donuts and Baskin-Robbins. Nearly all of Dunkin’ Brands restaurants are franchised units that are owned and operated by individual franchisees/licensees. Dunkin’ Brands enters into contractual agreements with franchisees that require the franchisees to follow systems devised by Dunkin’ Donuts and Baskin-Robbins in the operation of their restaurants.

Dunkin’ Brands operates Dunkin’ PAC, a separate segregated fund, that currently solicits and accepts contributions from only the executive and administrative personnel of Dunkin’ Brands. However, Dunkin’ PAC would like to solicit and accept contributions from its non-corporate franchisees/licensees, as well as from the executive and administrative personnel of its corporate franchisees/licensees.

Analysis

The Federal Election Campaign Act (the Act) prohibits corporations from making contributions in connection with federal elections. 2 U.S.C. § 441b(a). However, the Act grants corporations the ability to establish, administer and solicit contributions to an SSF. 2 U.S.C. § 441b(b)(2)(C) and 11 CFR 114.1(a)(2)(iii). A corporation and its SSF may solicit contributions from a “restricted class” of persons. Generally, a corporation’s restricted class consists of its executive and administrative personnel, stockholders and the families of both groups. 11 CFR 114.5(g)(1) and 114.1(j). An SSF may also solicit contributions from the executive and administrative personnel of the corporation’s “subsidiaries, branches, divisions and affiliates and their families.” 11 CFR 114.5(g)(1).

Commission regulations list several factors that are used to determine whether an organization is affiliated with a corporation. 11 CFR 114.5(g)(2). These include whether an organization has authority to direct or participate in the governance of another organization and whether an organization has the authority to control the officers or other decisionmaking employees of another organization. 11 CFR 100.5(g)(4)(ii)(B) and (C).

The Commission has previously issued several Advisory Opinions that address the affiliation of franchisees or licensees to the franchisor/licensor corporation. In those opinions, the Commission has found that the corporation and its franchisees/licensee are affiliated to the extent that the corporation exercises control over business practices, policies and procedures of the franchisees/licensees and that the franchisee/licensee has contractual obligations to the corporation who is the franchisor or licensor. See, e.g., AO 1992-07 (H&R Block), 1988-46 (Collins Foods) and 1979-38 (Hardee’s).

Under the agreements between Dunkin’ Brands and its franchisees, Dunkin’ Brands allows franchisees to use relevant trademarks, service marks, logos, emblems and other proprietary marks only in a manner specified by Dunkin’ Brands. Additionally, Dunkin’ Brands maintains the rights to establish standards for their franchisees/licensees including physical characteristics of restaurants, products that are sold, and other features such as a franchise’s layout, design, furnishings and equipment.

Due to the extent of Dunkin’ Brands’ control of the operation of its franchisees/licensees, the Commission concluded that Dunkin’ Brands’ franchisees/licensees are affiliated under the Act and Commission regulations. Accordingly, both the executive and administrative personnel of corporate franchisees/licensees, and non-corporate franchisees/licensees may be solicited for voluntary contributions to Dunkin’ PAC.

Date issued: April 27, 2012; Length: 4 pages.

Resources:

• Advisory opinion 2012-12 [PDF; 4 pages]
• Commission discussion of AO 2012-12