What constitutes 'Gross Sales' for an Extreme Art Studio franchise, and what is included in this definition?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Royalty. "Gross Sales" means all revenue that you receive from operating your Extreme Art Studio Business and any optional Module(s), including all amounts or other consideration that you receive, directly or indirectly, at or away from the Extreme Art Studio Business, and in the form of cash,
check, credit and debit card, barter exchange, trade credit, or other credit transactions, and including all proceeds from any business interruption insurance. For example, Gross Sales includes the following: (1) all monies you receive from customers, including monies received for the sale of products and services; (2) the amount of gift card redemptions; (3) the proceeds of any business loss or interruption insurance or similar insurance; and (4) any other revenue you derive. Gross Sales are deemed received at the time the products or services from which they were derived are delivered or rendered, or at the time the relevant sale takes place, whichever occurs first, regardless of whether final payment (e.g., collection on an account receivable) actually has been received. Gross Sales does not include any federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, or any customer tips.
Source: Item 6 — OTHER FEES (FDD pages 13–18)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, "Gross Sales" is defined as all revenue a franchisee receives from operating their Extreme Art Studio business, including any optional modules. This encompasses all amounts or other forms of payment received, whether directly or indirectly, at or away from the studio. Payments can be in the form of cash, check, credit and debit card, barter exchange, trade credit, or other credit transactions. Gross Sales also include proceeds from any business interruption insurance.
Specifically, Gross Sales includes all monies received from customers for the sale of products and services, the amount of gift card redemptions, proceeds from business loss or interruption insurance, and any other revenue derived from the business. The timing of when revenue is considered received is important; Gross Sales are deemed received when the products or services are delivered or rendered, or when the sale takes place, whichever comes first. This applies regardless of whether final payment has actually been received.
However, the definition of Gross Sales for an Extreme Art Studio franchise does not include certain items. Specifically excluded are any federal, state, or municipal sales, use, or service taxes collected from customers and then paid to the appropriate taxing authority. Customer tips are also excluded from the calculation of Gross Sales. Understanding this definition is crucial because many fees, such as the CR Software Fee and contributions to local advertising cooperatives, are calculated as a percentage of Gross Sales.