Do the financial performance representation figures for All States M.E.D. reflect the costs of sales?

According to All States M.E.D.'s 2024 Franchise Disclosure Document, the financial performance representation figures provided do not reflect the costs of sales, operating expenses, or other costs that must be deducted to determine net income or profit. The FDD advises prospective franchisees to conduct an independent investigation of the costs and expenses they will incur while operating their All States M.E.D. franchise.

The financial performance data presented by All States M.E.D. includes gross revenues and adjusted gross revenues, the latter of which is calculated by subtracting hypothetical royalty payments (8% of gross revenues) and local advertising expenses (the greater of 2% of gross revenues or $1,000 per month) that a franchisee would incur. For example, the 2022 gross revenue for the Miami Lakes, FL location was $832,521. After subtracting the royalty expense of $66,602 (8%) and local advertising of $16,650 (greater of 2% of gross revenues or $12,000), the adjusted gross revenue is presented.

This means that a prospective All States M.E.D. franchisee should not rely solely on the financial performance representations in the FDD to estimate their potential profits. Instead, they need to conduct their own due diligence to determine what their actual costs of sales, operating expenses, and other costs will be. The FDD suggests that franchisees or former franchisees may be one source of this information.

It is important to note that the FDD explicitly states that there is no assurance that a franchisee will earn as much as the amounts presented in the financial performance representation. The financial performance representation is based on the historical performance of a single affiliated company store outlet and that one outlet out of one outlet, or 100%, attained or surpassed the stated result in the table above.