What should an Itan franchisee do if they miscalculate Gross Sales?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Gross Sales" means the total gross sums generated from all goods and services sold from or in connection with your Salon, together with all other revenue and monies derived in connection with your Salon, including advertising revenue, sponsorship fees and business interruption insurance proceeds.
Gross Sales excludes: (a) sales or use taxes you pay to a Governmental Authority; (b) revenue you collect from a customer and later refund to that customer in a bona fide refund transaction; (c) revenue derived from the sale of furniture, fixtures or equipment in the ordinary course of business; and (d) tips paid to and retained by staff members as a gratuity.
The Manual may include policies governing the manner in which proceeds from the sale of gift cards are treated for purposes of calculating Gross Sales.
The Manual may also provide details on the calculation of Gross Sales relating to membership fees and qualifying purchases and redemptions by members under a loyalty or membership program.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
Based on the 2025 Itan Franchise Disclosure Document, the document does not explicitly state the procedure an Itan franchisee should take if they miscalculate Gross Sales. However, the FDD does define "Gross Sales" as the total gross sums generated from all goods and services sold from or in connection with your Salon, together with all other revenue and monies derived in connection with your Salon, including advertising revenue, sponsorship fees and business interruption insurance proceeds. Gross Sales excludes: (a) sales or use taxes you pay to a Governmental Authority; (b) revenue you collect from a customer and later refund to that customer in a bona fide refund transaction; (c) revenue derived from the sale of furniture, fixtures or equipment in the ordinary course of business; and (d) tips paid to and retained by staff members as a gratuity.
Since royalty fees are calculated as a percentage of Gross Sales, it is important for franchisees to accurately calculate and report this figure. The FDD states that the franchisee must pay Itan a royalty fee of 6% of sales, with the exception of franchises belonging to a related party. The franchise agreements also set forth a fee based on the percentage of sales to be contributed to a marketing fund to be spent on advertising for all locations. During the years ended December 31, 2023 and 2022 the marketing fund contribution rate was 4% of sales.
Given the lack of specific guidance in the FDD, it would be prudent for a prospective Itan franchisee to ask the franchisor directly about the process for correcting errors in Gross Sales calculations. Understanding the franchisor's expectations and procedures in such situations can help avoid potential disputes or penalties. It is also advisable to maintain accurate and detailed records of all sales and transactions to minimize the risk of miscalculations.