Are proceeds from business interruption insurance included in the Net Billings calculation for a Brightstar Care franchise?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
payments due.
NOTE 1. Royalty fees are based on a percentage of Net Billings. "Net Billings" is defined as the aggregate of all revenues and other income from whatever source derived (whether in the form of cash, credit, agreements to pay, or other consideration and whether or not payment is received at the time of sale or any of these amounts prove uncollectible), which arise or are derived by you or any other person from business conducted by or originating from the Agency. Net Billings also include all proceeds from any business interruption insurance. The majority of private pay clients pay on average, in about 14 days, and the system-wide blended days' sales outstanding is between 20 and 40 days. As noted below, royalties are collected 28 days after the end of a franchisee's weekly billing period. As a result, the royalty payment cycle generally matches the average time it takes for a franchisee to collect payment from its clients.
If you enter into the Expansion Option Agreement, all income or revenue generated in the Expansion Territory will be treated as Net Billings and be subject to the same conditions and obligations in the Franchise Agreement, including all Royalty/Continuing Fee obligations.
Source: Item 6 — OTHER FEES (FDD pages 17–34)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, proceeds from business interruption insurance are included when calculating Net Billings. Net Billings is defined as the total revenues and other income, regardless of the source or form of payment, derived from the Brightstar Care agency's business. This includes cash, credit, agreements to pay, or any other form of consideration, whether or not payment has been received.
This definition of Net Billings is important because Brightstar Care calculates royalty fees as a percentage of Net Billings. Therefore, any proceeds received from business interruption insurance will be subject to royalty fees. The FDD specifies that the majority of private pay clients pay on average in about 14 days, and the system-wide blended days' sales outstanding is between 20 and 40 days. Royalties are collected 28 days after the end of a franchisee's weekly billing period, which generally matches the average time it takes for a franchisee to collect payment from its clients.
Excluded from Net Billings are sales taxes and other taxes separately stated that you collect from clients and pay to taxing authorities, and no mark-up items such as personal protective equipment, testing costs, or credit card fees where the amount billed to client is at the franchisee's cost. Understanding what constitutes Net Billings is crucial for Brightstar Care franchisees to accurately calculate and pay their royalty fees, and to understand their financial obligations to the franchisor.