How is 'Adjusted Gross Revenue' defined for a Crawl Space Ninja franchise?
Crawl_Space_Ninja Franchise · 2024 FDDAnswer from 2024 FDD Document
- (i) "Total Revenue" means the total reported revenues and receipts from the sale of all products and services sold through the Reporting Franchised Outlets, the Reporting Multi-
Territory Franchised Outlets, and Affiliate-Owned Outlet (each a "Reporting Outlet" and collectively, the "Reporting Outlets"), respectively. Total Revenue does not include sales tax, nor does it include the value of any gift cards or other rebates. In Table 1(C) above, "Average Weekly Revenue" means Total Revenue as defined above divided by seven (7).
(ii) "Total Labor (Production, Sales)" means the wages paid to certain personnel of the Reporting Outlet, including for their performance of the Approved Services and for sales made by the Reporting Outlet during the Measurement Period, as reported to us by the indicated Reporting Outlet.
(iii) "Total Materials" means the reported cost of job materials used in connection with the operation of the Reporting Outlet during the Measurement Period, as reported to us by the indicated Reporting Outlet.
(iv) "Adjusted Gross Revenue" means "Total Revenue" minus "Total Labor (Production, Sales)" and "Total Materials."
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 41–49)
What This Means (2024 FDD)
According to the 2024 Crawl Space Ninja FDD, Adjusted Gross Revenue is defined as Total Revenue minus Total Labor (Production, Sales) and Total Materials. Total Revenue includes all revenues and receipts from the sale of products and services through Reporting Franchised Outlets, Reporting Multi-Territory Franchised Outlets, and Affiliate-Owned Outlets. Total Revenue does not include sales tax or the value of gift cards or rebates. Total Labor (Production, Sales) includes wages paid to personnel for performing approved services and sales made by the Reporting Outlet. Total Materials is the reported cost of job materials used in connection with the operation of the Reporting Outlet.
For a prospective Crawl Space Ninja franchisee, understanding Adjusted Gross Revenue is crucial because it provides a clearer picture of profitability by accounting for the direct costs associated with labor and materials. This metric helps in assessing the efficiency of operations and the true revenue potential of the franchise. By subtracting the costs of labor and materials from the total revenue, franchisees can better evaluate their financial performance and make informed decisions about cost management and pricing strategies.
For example, the FDD shows the Knoxville, Tennessee Affiliate Owned Outlet with a Total Revenue of $2,973,989, Total Labor of $687,694, and Total Materials of $596,363, resulting in an Adjusted Gross Revenue of $1,689,932. This represents 57% of Gross Revenue. Similarly, the table of Reporting Franchised Outlets shows the Columbia/Greenville SC location with an Adjusted Gross Revenue of $457,799, which is 64% of Gross Revenue. These examples illustrate how Adjusted Gross Revenue can vary across different locations and can be used to benchmark performance.
It is important to note that while Adjusted Gross Revenue provides a useful metric, it does not account for all operating expenses. Franchisees should consider all other expenses, such as marketing, royalties, and other overhead costs, to determine their overall profitability. The FDD also provides data on other disclosed operating expenses, allowing prospective franchisees to conduct a comprehensive financial analysis.