Are gift card purchases included in the Gross Revenue calculation for Fly Fitness?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the initial purchase of gift cards is not included in the calculation of Gross Revenue. However, the amount of purchases made when a customer redeems a gift card is included in Gross Revenue.
This means that Fly Fitness franchisees do not pay royalty fees or Brand Fund contributions on the initial sale of a gift card. Instead, these fees are paid when the gift card is used to purchase goods or services at the Fly Fitness location. This is a common practice in franchising, as it prevents franchisees from paying fees on money that has not yet been earned.
For a prospective Fly Fitness franchisee, this distinction is important for financial planning and reporting. Franchisees must accurately track gift card sales and redemptions to properly calculate Gross Revenue and remit the correct royalty and Brand Fund Contribution amounts. This also affects the timing of revenue recognition for accounting purposes.