Can Hyper Kidz revoke or withdraw any authorized exclusions from Gross Sales?
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 Any exclusion may be revoked or withdrawn at any time by us.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, Hyper Kidz has the authority to revoke or withdraw any previously authorized exclusions from Gross Sales at any time. Gross Sales is defined as the total selling price of all services and products, and all income related to the franchised business, whether for cash or credit, regardless of collection. Gross Sales expressly excludes taxes collected from customers and paid to the appropriate taxing authority, as well as customer refunds or adjustments.
This means that while Hyper Kidz may initially allow a franchisee to exclude certain items from their Gross Sales calculations when determining royalty and brand development fees, this is not a permanent arrangement. Hyper Kidz retains the right to change its mind and include those items in Gross Sales at any point during the franchise agreement.
For a prospective franchisee, this implies a degree of uncertainty in projecting revenue-based fees. While certain exclusions might be in place initially, franchisees need to be prepared for the possibility that these exclusions could be removed, potentially increasing the amount they owe in royalty and brand development fees. It would be prudent for a potential franchisee to seek clarification on what specific items might be considered for exclusion and to understand the conditions under which these exclusions might be revoked.