What deductions are allowed from Gross Sales when calculating fees for an Alloy franchise?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
"Gross Sales" means the total gross revenue from the provision of all products and services sold or performed in, at, from or away from the Alloy Facility, or through or by means of the Franchise Business, whether from cash, check, credit card, debit card, barter or exchange, or other credit transactions, and regardless of collection, and including (a) session fees, membership fees, initiation fees, enrollment fees, processing fees, paidin-full dues, renewal fees, corporate/third party payer fees, monthly dues and any fees or revenue generated and derived during any pre-sales; (b) fees and charges for optional services such as personal training, small group training and other optional programs we design; (c) fees charged to non-members using the Facility's services; and (d) revenue derived from merchandise and product sales. Sales taxes, use taxes, and other similar taxes added to the sales price and collected from the customer and paid to the appropriate taxing authority are deducted from Gross Sales.
Source: Item 6 — OTHER FEES (FDD pages 15–20)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the only deductions allowed from gross sales when calculating fees are sales taxes, use taxes, and other similar taxes. These taxes must be added to the sales price, collected from the customer, and then paid to the appropriate taxing authority. Gross sales encompass all revenue sources, including session fees, membership fees, personal training fees, merchandise sales, and any other income generated from the Alloy facility.
This definition of gross sales is important for prospective franchisees because it directly impacts the royalty fees and other fees owed to Alloy. By specifically defining what constitutes gross sales and what deductions are permitted, Alloy ensures transparency and consistency in calculating franchisee obligations. Franchisees need to be aware that virtually all revenue generated by the business is subject to royalty fees, with the exception of pass-through sales taxes.
The FDD also specifies that Alloy requires franchisees to submit weekly gross sales reports and may electronically access the franchisee's computer system to verify this information. This highlights the importance of accurate record-keeping and transparency in reporting gross sales to the franchisor. Failure to accurately report gross sales could lead to audits and potential penalties.
It is fairly typical in the franchise industry for franchisors to define gross sales broadly and allow very few deductions. This approach ensures that royalty fees are based on the total revenue generated by the franchise, aligning the franchisor's interests with the franchisee's success. Prospective Alloy franchisees should carefully review the definition of gross sales and ensure they understand what revenue streams are included in the calculation of royalty fees.