How does the definition of 'Gross Revenue' for Bft differ from the definition of 'Gross Sales' in the Franchise Agreement?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.
Definitions Used Throughout Item 19
- "Gross Revenue" means the total revenue generated by a given Studio, including all revenue generated from the sale and provision of any and all approved services at, from, or otherwise through, that Studio. Gross Revenue excludes sales tax (that the Studio owner must pay directly to the appropriate taxing authority). Please note, Gross Revenue is defined differently than how "Gross Sales" is defined in the Franchise Agreement, and as such, the amount of Royalty fees you pay under the Franchise Agreement may be different than if applied to Gross Revenue data provided below.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 67–75)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the term "Gross Revenue" is specifically defined for Item 19, which covers financial performance representations. Gross Revenue includes the total revenue generated by a Bft studio from all approved services. However, it explicitly excludes sales tax that the studio owner remits directly to the taxing authorities.
Importantly, the FDD emphasizes that the definition of "Gross Revenue" used in Item 19 differs from the definition of "Gross Sales" found in the Franchise Agreement. This distinction is critical because the royalty fees that a franchisee pays to Bft are based on the definition of "Gross Sales" in the Franchise Agreement.
Because the definition of Gross Revenue differs from Gross Sales, the amount of royalty fees a franchisee pays to Bft may be different than if the royalty fee was applied to the Gross Revenue data provided in Item 19. A prospective franchisee should carefully review the Franchise Agreement to understand how "Gross Sales" is defined and how it impacts royalty payments, and should discuss this with the franchisor.