For Itan franchises, how are proceeds from the sale of gift cards treated when calculating Gross Sales?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
"Gross Sales" means all gross sums you bill or collect from all goods and services sold, plus all other sums you collect from the operation of your Salon including advertising revenue, sponsorship fees and business interruption insurance proceeds. Gross Sales excludes: (a) sales or use taxes; (b) amounts refunded to customers; (c) revenue from the sale of furniture, fixtures and 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 customer loyalty or membership program.
Source: Item 6 — OTHER FEES (FDD pages 11–15)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the treatment of gift card proceeds in calculating Gross Sales is not explicitly detailed in Item 6. While the document defines "Gross Sales" as all gross sums billed or collected from goods and services, plus other sums collected from salon operations, it also states that the manual may include policies governing how proceeds from the sale of gift cards are treated for purposes of calculating Gross Sales.
This means that the specific rules for including or excluding gift card sales from Gross Sales calculations are found in the Itan operations manual, rather than the FDD itself. Since Gross Sales figures are used to calculate royalty fees and other payments to Itan, it is important for prospective franchisees to understand exactly how gift card sales are accounted for.
A potential franchisee should review the Itan operations manual carefully to understand the specific policies related to gift card proceeds and how they impact Gross Sales calculations. This will help in accurately forecasting revenue and understanding the financial obligations to Itan. Franchisees should ask Itan for clarification on this point during their due diligence.