What is excluded from 'Gross Sales' when calculating the royalty fee for a Bft franchise?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
5.3 Gross Sales. "Gross Sales" means the total revenue, in whatever form, generated by the Studio, whether or not in compliance with this Agreement and regardless of receipt, including all revenue generated from the sale and provision of any and all gift cards and other products and services at or through the Studio and all proceeds from any business interruption insurance related to the non-operation of the Studio. "Gross Sales" does not include (a) any sales tax and equivalent taxes that are collected by Franchisee for or on behalf of any governmental taxing authority and paid thereto, or (b) the value of any allowance issued or granted to any client of the Studio that is credited in good faith by Franchisee in full or partial satisfaction of the price of the Approved Products or Approved Services offered in connection with the Studio.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, the royalty fee is 7% of Gross Sales. Gross Sales is defined as the total revenue generated by the studio. However, there are some exclusions. Specifically, Gross Sales does not include sales tax or equivalent taxes that the franchisee collects for a governmental taxing authority and pays to them. Additionally, the value of any allowance issued or granted to any client of the studio that is credited in good faith by the franchisee in full or partial satisfaction of the price of the Approved Products or Approved Services offered in connection with the Studio is excluded from Gross Sales.
For a prospective Bft franchisee, this means that when calculating the 7% royalty fee, they do not need to include the amount of sales tax they collect and remit to the government. Also, if they offer any discounts or allowances to clients that are applied to the price of products or services, the value of those discounts is not included in Gross Sales for royalty calculation purposes. This can help reduce the royalty burden on franchisees, as they are not paying a percentage on money that is passed through to the government or used for customer discounts.
It is important for franchisees to maintain accurate records of all sales, taxes collected, and allowances granted to ensure accurate royalty payments. Failure to properly calculate and remit royalty fees could result in penalties or termination of the franchise agreement. Franchisees should consult with a qualified accountant or financial advisor to ensure compliance with all royalty fee requirements.