What is the definition of Gross Sales for a Benihana franchise according to this section?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.3 In addition to Advertising Contributions to be paid to BNC under Section 7.3 of this Agreement, Franchisee must spend in each of Franchisee's fiscal years an amount ("Local Spend") that is not less than two percent (2%) of Gross Sales (as defined in this Agreement) in the
prior fiscal year. Local Spend is intended to and may be used for local television, radio, digital, magazine, newspaper advertising, direct mail, billboard advertising, coupons, promotional brochures and literature, point-of-sale advertising materials, and other marketing specific to the Restaurant ("Local Advertising").
Source: Item 23 — Receipts (FDD pages 74–576)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, franchisees are required to spend a minimum amount on local advertising, calculated as a percentage of Gross Sales. Specifically, franchisees must spend at least two percent of the previous fiscal year's Gross Sales on local advertising initiatives. These initiatives may include local television, radio, digital, magazine, and newspaper advertising, as well as direct mail, billboard advertising, coupons, promotional brochures, point-of-sale advertising materials, and other marketing efforts specific to the Benihana restaurant location.
Gross Sales is a critical figure because it directly impacts the franchisee's required spending on local advertising. A higher Gross Sales figure from the previous year will necessitate a larger advertising budget for the current year, ensuring continued marketing efforts to sustain and grow the business. This requirement ensures that franchisees actively participate in promoting their restaurants within their local markets, contributing to brand awareness and customer traffic.
It is important for prospective Benihana franchisees to understand how Gross Sales is defined in the Franchise Agreement, as this definition will determine the base amount used to calculate the mandatory local advertising spend. Franchisees should clarify with Benihana what specific revenue streams are included or excluded from the Gross Sales calculation to accurately budget for their advertising obligations. Understanding this definition is crucial for financial planning and ensuring compliance with the franchise agreement.