How is the Gross Revenue calculated for the Fitstop Local Marketing Requirement (LMR)?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
the policies prescribed by us and are not in any way misleading or deceptive.
- 6.4.2 You must expend the minimum amount equal to 1% of the Gross Revenue generated by the Franchised Business during the preceding calendar month of operations to market, promote and advertise the Franchised Business within the Designated Territory (the "Local Marketing Requirement" or "LMR"). We may require that all or some portion of your LMR be expended on services/collateral that you must acquire from one (1) or more of our then-current Approved Suppliers. Upon our request, you must provide us with invoices or other proof of your monthly expenditures on local advertising and marketing. You must ensure that: (i) the Franchised Business has a dedicated phone line for use in connection with the Franchised Business only (and no other business, including any other System Business); and (ii) the Franchised Business is listed in the appropriate Internet-based directories that we designate in the Manual(s) or otherwise.
- 6.4.3 You may not advertise and promote the Franchised Business outside of the Designated Territory, unless (a) the geographic area wherein you wish to advertise is contiguous to the Designated Territory and that area has not been granted to any other System Business or System franchisee/developer, and (b) we otherwise provide our prior written consent.
- 6.5 Brand Development Fund. We have established or expect to establish a brand development fund (the "Fund") designed to promote, advertise, market and/or otherwise develop the System, Proprietary Marks, System Business(es), Approved Services/Products and/or our brand generally. You will be required to contribute to the Fund an amount equal to two percent (2%) of the Gross Revenue of the Franchised Business ("Fund Contributions"), which shall be remitted to us at the same time and in the same manner as your Royalty Fees (unless we designate another method upon at least 30 days' prior written notice via the Manual(s) or otherwise). All Fund Contributions are non-refundable upon payment, and we will account separately for all sums paid to the Fund.
- 6.6 System Marketing Material and/or Promotional Campaigns. We will direct all advertising programs and have sole discretion to approve or disapprove the creative concepts, materials, and media used in the programs. Based thereon, we will have sole discretion to administer the marketing fees this Agreement describes herein.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Gross Revenue for the purpose of calculating the Local Marketing Requirement (LMR) is defined as the total amount of consideration received for all goods and services, whether in cash, credit, or payment in kind. This includes all membership fees and other revenue generated from the sale of approved services and products, as well as revenue from barter transactions (exchanging tuition for services or products).
However, certain items are excluded from the Gross Revenue calculation. These exclusions include refunds, uncollectible debts, taxes collected and paid to a tax authority, and tuition credits for staff children. Additionally, the price of goods returned by customers for exchange can be deducted, provided that these goods were previously included in Gross Revenue and the sales price of the replacement goods is included in Gross Revenue. Sales taxes imposed by governmental authorities and collected from customers are also excluded, provided they are added to the selling price or absorbed therein and actually paid to the governmental authority.
Each credit sale is treated as a sale for the full price in the month the charge or sale is made, regardless of when payment is received. This definition is important because Fitstop franchisees must spend a minimum of 1% of their Gross Revenue from the preceding calendar month on local marketing to promote their franchise within their designated territory. Fitstop may require franchisees to spend all or a portion of this LMR with approved suppliers and may request invoices or other proof of monthly expenditures on local advertising and marketing.