Under what circumstances are Bft franchisees required to 'gross up' their payments to account for taxes?

According to Bft's 2025 Franchise Disclosure Document, franchisees may be required to 'gross up' their payments to Bft under specific tax circumstances. This means that if a franchisee's studio is located in a jurisdiction where the taxing authority subjects Bft to tax assessments on payments the franchisee submits for Royalty fees and Fund Contributions, the franchisee will have to increase their payment to cover these taxes. This adjustment ensures that Bft receives the full amount of the Royalty fees and Fund Contributions, even after taxes are applied by the local jurisdiction.

In practical terms, this means a Bft franchisee needs to be aware of the tax laws in their specific location. If the local tax authority imposes taxes on payments made to Bft, the franchisee will be responsible for calculating and adding the appropriate tax amount to their Royalty and Fund Contribution payments. This could add complexity to the franchisee's accounting and financial management, as they will need to stay informed about any changes in local tax laws that could affect their payment obligations to Bft.

It is important for prospective Bft franchisees to clarify with Bft which jurisdictions, if any, currently impose such tax assessments. Understanding this requirement is crucial for accurately forecasting expenses and managing cash flow. Franchisees should also seek professional tax advice to ensure they comply with all applicable tax laws and correctly calculate any necessary 'gross up' adjustments to their payments.