When are Gross Sales deemed received for an Extreme Art Studio franchise?

According to the 2024 Extreme Art Studio Franchise Disclosure Document, Gross Sales are considered received when the products or services are delivered or rendered, or when the sale occurs, whichever happens first. This holds true regardless of whether final payment has been received. Gross Sales encompass all revenue from operating the franchised business, including cash, checks, credit and debit card payments, barter exchanges, trade credits, and proceeds from business interruption insurance.

This definition is important for franchisees because the royalty fee owed to Extreme Art Studio is calculated as a percentage of Gross Sales. Specifically, the franchisee pays a recurring royalty fee equal to the greater of 8% of Gross Sales or $500 per month. Therefore, understanding when sales are 'deemed received' is crucial for accurate royalty reporting and payment, as the royalty is due regardless of whether the franchisee has actually collected the revenue.

For example, if an Extreme Art Studio provides art classes in January but the customer pays in February, the revenue is still counted as part of January's Gross Sales. This could impact the franchisee's cash flow, as they are obligated to pay royalties on revenue that they may not have physically received yet. Franchisees should maintain accurate records of when services are delivered or sales take place to ensure compliance with the franchise agreement and avoid potential disputes with Extreme Art Studio.