Does Gross Revenue for Fly Fitness include gift card purchases?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
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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.
Source: Item 6 — OTHER FEES (FDD pages 8–14)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, gross revenue does not include gift card purchases at the time of purchase. However, the gross revenue does include the redemption amount of purchases made by gift card.
This means that Fly Fitness franchisees do not have to pay royalty fees on gift card sales until the gift cards are actually used to purchase goods or services at the franchise location. This is a common practice in the franchise industry, as it prevents franchisees from having to pay royalties on money that has not yet been earned.
For a prospective Fly Fitness franchisee, this distinction is important for financial planning and royalty calculations. Franchisees should keep accurate records of gift card sales and redemptions to ensure accurate reporting of gross revenue and calculation of royalty fees. This policy ensures that royalties are paid on actual revenue earned rather than potential future revenue.