What is the relationship between Note 1 and Note 2 and the Fly To Fit royalty fee?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty | 6% of your gross sales | Monthly, by the 1st Tuesday of the following month | See Note 1 and Note 2. |
Notes
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- "Gross Sales" is defined in our franchise agreement as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected, (iii) sale of used equipment not in the ordinary course of business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
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- We currently require you to pay royalty fees and other amounts due to us by preauthorized bank draft. However, we can require an alternative payment method.
Source: Item 6 — OTHER FEES (FDD pages 12–16)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, the royalty fee is 6% of gross sales, payable monthly by the first Tuesday of the following month. Note 1 defines "Gross Sales" as the total dollar amount of all sales generated through the franchisee's business, including payments for services or products sold, whether for cash or credit. However, Gross Sales does not include bona fide refunds to customers, sales taxes collected, the sale of used equipment not in the ordinary course of business, or sales of prepaid cards or similar products (though the redemption of such cards or products will be included in Gross Sales). Therefore, the royalty fee is calculated on this specific definition of gross sales.
Note 2 specifies that Fly To Fit currently requires franchisees to pay royalty fees and other amounts due via preauthorized bank draft, but the franchisor retains the right to require an alternative payment method. This means that while the standard practice is electronic payments, Fly To Fit can change this requirement.
In summary, Note 1 clarifies what constitutes "Gross Sales" for royalty calculation, while Note 2 outlines the current payment method for royalties and reserves Fly To Fit's right to change it. Prospective franchisees should be aware of these definitions and payment terms as they directly impact the amount and method of royalty payments.