What is the definition of 'Gross Profit' for an Itan salon, as used in the financial performance representation?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
For purposes of this financial performance representation, the following terms have the meanings given to them below:
"COGS" means the cost of merchandise and retail items purchased for resale.
"Company-Owned Salon" means any Salon that is owned by: (a) us; (b) any affiliate of ours; or (c) any person listed in Item 2 of this Disclosure Document if that person, or any other person listed in Item 2, is also involved with managing the Salon.
"Customer" means an individual who purchased any goods or services (including a monthly membership) at any time during the Measuring Year. A Customer who purchases goods or services at multiple Salons during the Measuring Period is counted as a customer of each such Salon.
"FPR" means the financial performance representation set forth in Item 19 of this Disclosure Document.
"Franchised Salon" means any Salon that is owned by a franchisee.
- "Gross Profit" means the financial performance metric calculated as Gross Sales minus Cost of Goods Sold.
- "Gross Sales" means the total revenue generated from all goods and services sold by the Salon less taxes and customer refunds.
- "Measuring Period" means the period of time commencing January 1, 2024, and expiring December 31, 2024.
- "Qualifying Salon" means any Franchised Salon that satisfies each of the following criteria: (a) the outlet was open and operating throughout the entire Measuring Period; and (b) the outlet provided us with all data we requested in order to prepare the FPR.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 39–42)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Gross Profit is defined as Gross Sales minus the Cost of Goods Sold. Gross Sales is the total revenue from all goods and services sold by the salon, less taxes and customer refunds. Cost of Goods Sold (COGS) is the cost of merchandise and retail items purchased for resale. This definition is used in the financial performance representation (FPR) within the document.
For a prospective Itan franchisee, understanding this definition is crucial because Gross Profit is a key metric in assessing the financial performance of Itan salons. The Item 19 financial performance representation includes data on Annual Gross Sales, Annual Cost of Goods Sold, and Annual Gross Profit for 28 Qualifying Salons during the Measuring Period of January 1, 2024, to December 31, 2024. By understanding how Gross Profit is calculated, a franchisee can better analyze the financial performance data provided and make informed decisions about their potential investment.
It's important to note that the FPR includes limited expense information, and franchisees will incur additional expenses such as insurance, session consumables, and utilities. The Itan FDD advises prospective franchisees to consult with their advisors to develop their own revenue estimates. While the FDD provides historical data, individual results may vary, and there is no assurance that a franchisee will achieve the same level of financial performance as the salons included in the FPR.