For Itan franchises, what are franchisees required to do with Gross Sales?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company generates revenues from franchising through individual franchise agreements. In general, the Company's franchise agreements provide for the payment of an initial franchise fee for each opened franchise salon. The franchise agreements also require the franchisees to pay the Company a royalty fee of 6% of sales, with the exception of franchises belonging to a related party (see note 5). 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. This fee can be changed from time to time. During the years ended December 31, 2023 and 2022 the marketing fund contribution rate was 4% of sales. A vacation rate of 3.5% was effective from January 1, 2022 to June 30, 2022.
- "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)
According to Itan's 2025 Franchise Disclosure Document, franchisees are required to pay a royalty fee of 6% of sales. Franchisees must also contribute a percentage of sales to a marketing fund, which is used for advertising for all locations. In 2023 and 2022, this marketing fund contribution rate was 4% of sales. A vacation rate of 3.5% was effective from January 1, 2022, to June 30, 2022.
Gross Sales for Itan include the total gross sums generated from all goods and services sold from the Salon, along with all other revenue derived in connection with the Salon, including advertising revenue, sponsorship fees, and business interruption insurance proceeds. However, Gross Sales exclude sales or use taxes paid to a Governmental Authority, revenue collected from a customer and later refunded in a bona fide refund transaction, revenue from the sale of furniture, fixtures, or equipment in the ordinary course of business, and tips paid to and retained by staff members as a gratuity.
The manual may include policies governing how proceeds from the sale of gift cards are treated when calculating Gross Sales. The manual may also provide details on calculating Gross Sales relating to membership fees and qualifying purchases and redemptions by members under a loyalty or membership program. Franchisees should consult the Brand Standards Manual for further details on calculating Gross Sales.