How does the continuing royalty fee for Fly Fitness in Item 6 relate to the definition of Gross Revenue?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
ou must pay them to us.
1 You must pay us a Continuing Royalty Fee equal to seven percent (7.0%) of the Gross Revenue generated weekly by your Franchised Business. "Gross Revenue" includes all revenues and income from any source derived or received by Franchisee from, through, by or on account of the operation
of the Franchised Business or made pursuant to the rights granted hereunder, including but not limited, any and all other revenues received using Franchisor's methods, operations and/or trade secrets whether received in cash, in services, in kind, from barter and/or exchange, on credit (whether or not payment is actually received) or otherwise. It does not include (i) any sales tax or similar taxes collected from customers and turned over to the governmental authority imposing the tax, (ii) properly documented refunds to customers, (iii) properly documented promotional discounts (i.e., coupons) or (iv) properly documented employee discounts (limited to 3% of Gross Revenue). Gross Revenue does not include gift card purchases, at the time of purchase, but Gross Revenue does include the redemption amount of purchases made by gift card. If you do not report revenues for the month, then we will collect 120% of the last Continuing Royalty Fee collected and settle the balance the next period in which you report revenue. You are required to set up authorization at your bank to allow us to electronically transfer funds from your bank account to our bank account. Interest and late fees will apply to any late payments or electronic funds transfer requests denied due to insufficient funds.
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the continuing royalty fee is directly tied to the franchisee's Gross Revenue. Franchisees must pay Fly Fitness a continuing royalty fee equal to 7% of the Gross Revenue generated weekly by their franchised business. This fee is due every Wednesday for the previous week's revenue (Monday through Sunday). Therefore, the more revenue a Fly Fitness franchise generates, the higher the royalty fee paid to the franchisor.
Gross Revenue for Fly Fitness includes all revenues and income from any source derived or received by the franchisee from the operation of the franchised business. This includes revenues received in cash, services, in kind, from barter or exchange, or on credit, regardless of whether payment is actually received. However, Gross Revenue does not include sales tax collected and remitted to the government, properly documented refunds to customers, promotional discounts (i.e., coupons), or employee discounts (limited to 3% of Gross Revenue). Additionally, the purchase of gift cards is excluded from Gross Revenue at the time of purchase, but the redemption value of purchases made with gift cards is included.
If a Fly Fitness franchisee fails to report revenues for the month, Fly Fitness has the right to collect 120% of the last Continuing Royalty Fee collected and settle the balance the next period in which revenue is reported. Fly Fitness requires franchisees to authorize electronic fund transfers from their bank account to cover these fees. Late payments or denied electronic fund transfers due to insufficient funds will incur interest and late fees. Franchisees must furnish Fly Fitness with a Gross Revenue report every Wednesday for the prior week. Fly Fitness also reserves the right to implement a point-of-sale (POS) system that franchisees must use, potentially allowing for electronic transfer of data for Gross Revenue reporting.