What is included in the definition of 'Gross Sales' for an Extreme Art Studio franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
For purposes of this Franchise Agreement, "Gross Sales" means all revenue that you receive from operating the Franchised Business (including any modules), including, but not limited to, 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, without limitation, the following:
(a) all monies you receive from customers, including, but not limited to, monies received from the sale of products and services;
(b) the amount of gift card redemptions;
(c) the proceeds of any business loss or interruption insurance or similar insurance; and
(d) any other revenue you derive.
3.2.3 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, any bona fide customer refunds or customer tips.
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.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, Gross Sales include all revenue received from operating the franchised business. This encompasses all amounts or other forms of payment received directly or indirectly, whether in cash, check, credit/debit card, barter exchange, trade credit, or other credit transactions. Gross Sales also include proceeds from any business interruption insurance.
Specifically, Gross Sales include 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. This definition is comprehensive, ensuring that all income streams are accounted for when calculating royalties and other fees.
However, Gross Sales do not include federal, state, or municipal sales, use, or service taxes collected from customers and remitted to the appropriate taxing authority. Additionally, bona fide customer refunds or customer tips are excluded from Gross Sales. Gross Sales are considered received when the products or services are delivered or rendered, or when the sale occurs, regardless of whether final payment has been received. This means that even if a customer has not yet paid, the sale is still counted towards Gross Sales at the time of the transaction.
For a prospective Extreme Art Studio franchisee, understanding this definition is crucial because it directly impacts the calculation of royalty fees. By clearly outlining what constitutes Gross Sales and what is excluded, Extreme Art Studio aims to provide transparency and avoid potential disputes over royalty payments. Franchisees should carefully review this definition and seek clarification from Extreme Art Studio on any ambiguous aspects to ensure accurate reporting and compliance.