How does All States M.E.D. handle internet sales originating from a franchisee's territory?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
nd an outlet that a franchisee would operate.
First, the company outlet has operated since 2015.
Second, the company outlet operates a nationwide website. So the company only presents above those sales, both online and at the physical outlet, as to a territory size of 1,494,236 (for 2022) or 1,441,861 (for 2023) people around the store, as stated above. Your territory would likewise be for approximately 1.5 million people around your store. And the franchisor would likewise credit to franchisees those internet sales which come from the franchisee's territory.
In addition, there are financial differences. A franchised outlet would incur Royalties (8% of Gross Revenues) and Local Advertising (the greater of 2% of Gross Revenues or $1,000 per month).
Gross Revenue means total revenue derived from the sale of goods or services less sales tax, discounts, allowances, and returns.
Adjusted Gross Revenues as if a Franchised Outlet means the Gross Revenues less expenses that would have been incurred if this were a franchised outlet, namely Royalties and Local Advertising, as explained above.
The financial performance representation figures do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchised business. Franchisees or former franchisees, listed in the Franchise Disclosure Document, may be one source of this information.
Written substantiation for this financial performance representation is available to you upon reasonable written request.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 39–42)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, the company operates a nationwide website and credits franchisees for internet sales originating from their territories. The company store's financial performance representation includes revenue earned both online and at the physical outlet within a specific territory size. For 2022, this territory size was 1,494,236 people, and for 2023, it was 1,441,861 people around the store.
All States M.E.D. states that a franchisee's territory would likewise be for approximately 1.5 million people around their store. This means that the financial results presented for the company-owned outlet are based on a comparable market size to what a franchisee would be assigned. The franchisor's crediting of internet sales to the franchisee's territory is a potentially significant benefit, as it allows franchisees to benefit from online sales in addition to walk-in customers.
However, the FDD also notes material financial differences between the company outlet and a franchised outlet. A franchised outlet would incur Royalties (8% of Gross Revenues) and Local Advertising (the greater of 2% of Gross Revenues or $1,000 per month). The financial performance representation figures do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue figures to obtain net income or profit. Therefore, prospective franchisees should conduct an independent investigation of the costs and expenses they will incur in operating their franchised business.
It is important to note that the financial performance representation is based on the performance of a single affiliated company store outlet. The FDD explicitly states that individual results may differ, and there is no assurance that a franchisee will earn as much. The FDD also mentions that in 2023, there was one franchised outlet, but its earnings were not presented because it opened part way through the year. Prospective franchisees should consider these factors and carefully review the financial performance representation with their financial advisors.