What components are included in the 'Gross Revenue' calculation for a Closet Storage Concepts franchise?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
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- "Gross Revenue" includes the total gross revenue derived by a franchisee from the operation of the Franchised Business whether from sales for cash or credit, including sales of both franchise products and services, and including installation charges, exclusive of all sales taxes, use taxes, gross receipts taxes and other similar taxes added to the sales price and collected from the customer, and less any bona fide refunds, rebates, and discounts.
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- Cost of Goods Sold represents the cost of raw materials and completed products, including applicable inbound freight costs and taxes, used in the production and installation of the products sold and represented by Gross Revenues.
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- Cost of Goods Sold as a Percentage of Gross Sales is the mathematical result of dividing Cost of Goods Sold by Gross Revenue.
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- Advertising Spending represents amounts spent for digital advertising as well as print and media advertising to promote the business.
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- Return on Advertising is a measurement of advertising effectiveness. Return on Advertising is the mathematical result of dividing Gross Revenue by Advertising Spending.
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- Rent Expense represents the amount paid for showroom, shop, and storage space including taxes and common area maintenance charges paid to landlords.
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- Payroll Expense represents salary and wage amounts paid to all employees. Owner compensation is not included.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 49–55)
What This Means (2025 FDD)
According to Closet Storage Concepts's 2025 Franchise Disclosure Document, Gross Revenue includes the total revenue a franchisee derives from operating the franchised business. This encompasses revenue from cash or credit sales, including sales of both franchise products and services. Installation charges are also included in the gross revenue calculation. However, there are some exclusions. Gross Revenue does not include sales taxes, use taxes, gross receipts taxes, or other similar taxes that are added to the sales price and collected from customers. Additionally, bona fide refunds, rebates, and discounts are subtracted from the total to arrive at the Gross Revenue figure. Gross Revenue also does not include work in progress or any deposits received on orders.
For a prospective Closet Storage Concepts franchisee, understanding this definition is crucial for accurately assessing their financial performance and potential profitability. It clarifies what income streams are considered part of the business's revenue for royalty calculations and financial reporting. By understanding what is included and excluded, franchisees can better track their sales and manage their finances.
It is important to note that Closet Storage Concepts provides this definition in the context of financial performance representations, and they also state that written substantiation for these representations will be made available to a prospective franchisee upon reasonable request. This suggests that franchisees can request further clarification or documentation to support the figures presented in the Item 19 financial performance representation.