How does Face Foundrie recognize gift card revenue in the calculation of Gross Sales?

According to Face Foundrie's 2025 Franchise Disclosure Document, gross sales include all revenue derived from the operation of a Facial Bar, less sales or use tax, customer refunds, allowances, and discounts given in good faith. Specifically, Face Foundrie recognizes gift card revenue upon redemption. This means that when a customer purchases a gift card, the revenue is not immediately counted as part of gross sales. Instead, the revenue is recognized when the gift card is used to purchase goods or services at the Facial Bar.

This accounting practice has implications for franchisees. The franchisee will not see the revenue from gift card sales reflected in their gross sales figures until the gift cards are redeemed. This can affect the timing of revenue recognition and may impact the franchisee's financial reporting and royalty calculations. The FDD states that this is the same calculation Face Foundrie uses to calculate the Royalty Fee and other amounts under the Franchise Agreement.

For a prospective Face Foundrie franchisee, understanding this policy is crucial for accurate financial planning and management. It is important to track gift card sales and redemption rates to forecast future revenue accurately. Additionally, franchisees should be aware that their royalty fees will be based on the gross sales figures that include redeemed gift card revenue, not the initial sale of the gift cards. This approach ensures that Face Foundrie and its franchisees align on revenue recognition, providing a consistent basis for financial reporting and royalty payments.