What happens to sales assumed lost due to business interruption insurance payments when calculating Gross Revenue for 1-800-GOT-JUNK?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
Gross Revenue is defined in the Franchise Agreement to mean “the entire amount of the sale price, whether for cash, credit, payment in kind (valued at fair market value) or otherwise, of all sales from or in connection with the operation of the Franchised Business (including, but not limited to, the sale of any Services or products from or in connection with the operation of the Franchised Business). No deductions shall be allowed from Gross Revenue except for the following: (a) sums collected by or on behalf of Franchisee for any duly constituted governmental authority on account of sales taxes, good and services taxes or other taxes imposed directly upon the sale of goods or services (or both) from the Franchised Business, provided that the amount of any such tax has in fact been paid or otherwise accounted for by Franchisee to the appropriate governmental authority; (b) the amount of any refund or credit given in respect of any services or products provided to a customer of the Franchised Business for which a refund of the whole or part of the purchase price is made or for which a credit is given as long as such refund or credit is given in 4899-8658-3815.1
accordance with Franchisor’s policies and procedures in relation to refunds set out in the Operations Manual; (c) amounts for uncollected or uncollectable credit accounts as long as such credit accounts are deemed uncollected or uncollectable in accordance with Franchisor’s policies and procedures in relation to uncollected or uncollectable credit accounts set out in the Operations Manual; and (d) amounts uncollected for a customer of the Franchised Business due to discount coupons that were approved for use in advance by Franchisor.
Source: Item 6 — Other Fees (FDD pages 11–17)
What This Means (2025 FDD)
According to 1-800-GOT-JUNK?'s 2025 Franchise Disclosure Document, when calculating Gross Revenue, sales assumed to have been lost due to a business interruption, which formed the basis for business interruption insurance payments, must be included. This means that even though the 1-800-GOT-JUNK? franchisee didn't actually make those sales due to an interruption, the amount the insurer paid out to cover those lost sales is still factored into the Gross Revenue calculation.
This inclusion of business interruption insurance payments in Gross Revenue has a direct impact on the fees that 1-800-GOT-JUNK? franchisees pay. Specifically, the royalty fee is 8% of Gross Revenue, and the Sales, Marketing and Technology Fee is also 8% of Gross Revenue. By including the insurance payments in the Gross Revenue calculation, the franchisee will pay a higher royalty and Sales, Marketing and Technology Fee than they would if Gross Revenue only reflected actual sales.
For a prospective 1-800-GOT-JUNK? franchisee, this means that during periods of business interruption covered by insurance, while the insurance payment helps offset the lost revenue, it also increases the amount paid to 1-800-GOT-JUNK? in royalty and other fees. This is an important factor to consider when evaluating the overall financial impact of business interruptions and the value of business interruption insurance. Franchisees should carefully review their insurance coverage and understand how these payments affect their financial obligations to 1-800-GOT-JUNK?.