How is 'Gross Profit' defined for a Degree Wellness franchise?

According to Degree Wellness's 2025 Franchise Disclosure Document, 'Gross Profit' is defined as Gross Sales less COGS (Cost of Goods Sold). Gross Sales include all gross receipts, less tips and sales tax. This figure is used to calculate the Royalty Fee, Local Advertising Requirement, and Fund Contribution under the Franchise Agreement. COGS includes all variable cost inputs to facilitate customer sales, including equipment-related consumables, medical supplies, and other usage-based costs.

For a prospective Degree Wellness franchisee, understanding this definition is crucial because it directly impacts the calculation of profitability. By subtracting the direct costs of goods sold from gross sales, franchisees can determine the initial profit margin before accounting for operating expenses such as advertising, insurance, rent, and payroll. This metric provides a clear view of the revenue remaining to cover these additional costs and generate net income.

Knowing the components of COGS is also important for managing expenses. Franchisees should carefully track these variable costs to optimize their spending and improve their gross profit margin. Efficient management of consumables, medical supplies, and other usage-based costs can lead to a higher gross profit, which in turn can improve the overall financial health of the Degree Wellness franchise.

It is important to note that this definition of Gross Profit is used specifically within the context of the Franchise Agreement for calculating fees and assessing financial performance. Franchisees should consult with financial professionals to understand how this definition aligns with standard accounting practices and how it impacts their overall business strategy.