Are there any circumstances under which the Continuing Royalty Fee for a Fly Fitness franchise might be refundable?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
use of our website. | | All fees and expenses described in this Item 6 are nonrefundable and are uniformly imposed. Except as otherwise indicated in the preceding chart, we impose all fees and expenses listed and you 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.
Source: Item 6 — OTHER FEES (FDD pages 8–14)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the Continuing Royalty Fee is generally nonrefundable. Item 6 explicitly states that all fees and expenses are nonrefundable and uniformly imposed. The Continuing Royalty Fee is 7% of weekly Gross Revenue. Gross Revenue does not include properly documented refunds to customers. Therefore, while the royalty fee itself is not refundable, the gross revenue calculation allows for deductions of customer refunds, which effectively reduces the base upon which the royalty fee is calculated.
This means that a Fly Fitness franchisee cannot get a refund on the royalty fees paid. However, if a franchisee issues a refund to a customer, that amount is deducted from the gross revenue before the royalty fee is calculated, resulting in a lower royalty fee for that week. This is a standard practice in franchising, where royalty fees are based on a percentage of revenue, and deductions are allowed for legitimate customer refunds to avoid overstating the revenue on which royalties are based.
It is important for prospective Fly Fitness franchisees to maintain accurate records of all revenue and customer refunds to ensure correct calculation of the Continuing Royalty Fee. Franchisees should also familiarize themselves with the specific definition of Gross Revenue in the Franchise Agreement to fully understand what is included and excluded from the royalty fee calculation.