What is the exception for understating gross revenue for a Big Air Trampoline Park franchisee?
Big_Air_Trampoline_Park Franchise · 2025 FDDAnswer from 2025 FDD Document
- (j) "Gross Revenues" means the total of all receipts derived from all sales of products and services at your Big Air Trampoline Business, including sales made away from your Big Air Trampoline Facility, insurance claims for lost profits to the extent a claim is paid by the insurer, and all other products and services sold or performed by or for you or your Big Air Trampoline Business or by means of the business conducted under this Agreement, whether the receipts are evidenced by cash, credit, checks, gift
certificates, scrip, coupons, services, property or other means of exchange. Gross Revenues do not include:
- (i) the amount of any tax imposed by any federal, state, municipal or other governmental authority directly on sales and collected from customers, provided that the amount of any such tax is shown separately and in fact paid by Franchisee to the appropriate governmental authority; and
- (ii) all customer refunds, valid discounts and coupons, and credits made by the Big Air Trampoline Business (exclusions will not include any reductions for credit card user fees, returned checks or reserves for bad credit or doubtful accounts).
Gross Revenues shall be deemed received by Franchisee at the time the Services or Products from which they were derived are delivered or rendered or at the time the relevant sale takes place, whichever occurs first, regardless of whether final payment (e.g., collection on a customer's personal check) actually has been received by Franchisee. Gross Revenues consisting of property, Products or Services shall be valued at the retail prices applicable and in effect at the time that they are received.
Source: Item 23 — RECEIPT (FDD pages 53–255)
What This Means (2025 FDD)
According to the 2025 FDD, Big Air Trampoline Park franchisees have specific guidelines for calculating gross revenues, which directly impact royalty and advertising fee obligations. Gross revenues encompass all income from sales of products and services, whether in cash, credit, or other forms of exchange. This includes sales made away from the facility and insurance claims for lost profits.
However, the FDD stipulates two key exceptions that allow a franchisee to reduce their reported gross revenues. The first exception involves taxes imposed directly on sales by a governmental authority, such as federal, state, or municipal taxes. These taxes can be excluded from gross revenues, provided they are shown separately and actually paid to the appropriate authority. The second exception covers customer refunds, valid discounts, coupons, and credits issued by the Big Air Trampoline Park business. This allows franchisees to account for situations where customers receive money back or price reductions.
It is important to note that certain reductions are explicitly disallowed. Credit card user fees, returned checks, and reserves for bad debt or doubtful accounts cannot be deducted from gross revenues. The FDD also specifies that revenues are considered received when the services or products are delivered or the sale takes place, regardless of when final payment is collected. This definition ensures consistent reporting and prevents franchisees from delaying revenue recognition to postpone fee payments. Understanding these inclusions and exclusions is crucial for Big Air Trampoline Park franchisees to accurately calculate and report their gross revenues, ensuring compliance with the franchise agreement and avoiding potential disputes with the franchisor.