What costs are subtracted from the Gross Revenues of a Degree Wellness Studio Management Business when calculating the Management Fee?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.1 In consideration for Management Company's performance of the Management Company Services and the grant of the licenses and sub-license set forth in Section 4, Licensed Provider hereby agrees to pay Management Company a management fee (herein called the "Management Fee"), which shall be the amount equal to the Gross Revenues of the Studio Management Business remaining after subtracting costs associated with Licensed Provider's salary and fringe benefits (and, if applicable, the Studio's employees' salary and wages and fringe benefits) as approved by Management Company, the Studio's payroll taxes and other withholding items, and any other Studio operating costs incurred by the Studio in accordance with this Agreement.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 63–66)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the Management Fee is calculated based on the Studio Management Business's Gross Revenues after certain costs are subtracted. Specifically, the Gross Revenues are reduced by the costs associated with the Licensed Provider's salary and fringe benefits, as well as the salaries, wages, and fringe benefits of the Studio's employees, provided these are approved by the Management Company.
In addition to personnel costs, the calculation also subtracts the Studio's payroll taxes and other withholding items. Furthermore, any other Studio operating costs incurred by the Studio in accordance with the Studio Management Agreement are also deducted from Gross Revenues before determining the Management Fee.
For a prospective Degree Wellness franchisee, this means the Management Fee is based on the net revenue of the studio, after accounting for significant operating expenses like salaries, benefits, and taxes. This structure could incentivize efficient management of these costs, as lower expenses would result in a higher base revenue figure from which the Management Fee is calculated.