What items are expressly excluded from 'Gross Sales' when calculating fees for a Hyper Kidz franchise?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
For the purposes of determining the fees to be paid under the Franchise Agreement, "Gross Sales" means the total selling price of all services and products and all income of every other kind and nature related to the Franchised Business, whether for cash or credit and regardless of collection in the case of credit. If a cash shortage occurs, the amount of Gross Sales will be determined based on the records of the point of sale system and any cash shortage will not be considered in the determination. Gross Sales expressly excludes taxes collected from your customers and paid to the appropriate taxing authority and customer refunds or adjustments. We may authorize certain other items to be excluded from Gross Sales. Any exclusion may be revoked or withdrawn at any time by us.
Source: Item 6 — OTHER FEES (FDD pages 10–15)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, "Gross Sales" is a critical figure used to calculate royalty fees, brand development fees, and local marketing fees. It represents the total revenue generated by the franchise. However, not all income is included in this calculation.
Specifically, the document states that "Gross Sales" expressly excludes taxes collected from customers that are then paid to the appropriate taxing authority. Additionally, customer refunds or adjustments are also excluded from the "Gross Sales" calculation. This means that a Hyper Kidz franchisee will not pay royalty fees on sales tax collected or on money refunded to customers.
The FDD also notes that Hyper Kidz may authorize certain other items to be excluded from Gross Sales at their discretion, but they retain the right to revoke or withdraw any such exclusion at any time. This clause provides Hyper Kidz with flexibility but also introduces some uncertainty for the franchisee, as these additional exclusions are not guaranteed and can be changed.