If Itan allows package sales, does Itan have the right to determine how sales proceeds are divided?

According to Itan's 2025 Franchise Disclosure Document, Itan has specific rights regarding the proceeds from gift card sales. Itan has the right to determine how gift card proceeds are divided or accounted for. Itan can also require that these proceeds be paid to them or deposited into a trust account that Itan controls, for later distribution to the Itan salons where the gift cards are redeemed. Furthermore, Itan retains the rights to proceeds from unredeemed gift cards.

This policy has significant implications for Itan franchisees. It means that while franchisees must participate in any gift card program Itan establishes and honor all gift cards, they may not have direct control over the revenue generated from those gift cards. Itan's control over the distribution of gift card proceeds ensures that the correct salon receives credit for the redemption, especially when gift cards are used across multiple locations.

However, this arrangement also introduces a potential risk for franchisees. If Itan manages the gift card proceeds through a trust account, franchisees are dependent on Itan for timely and accurate disbursement of their share. The fact that Itan retains proceeds from unredeemed gift cards could be seen as a loss of potential revenue for the franchisee. Prospective franchisees should seek clarification from Itan regarding the frequency and method of disbursement, as well as the policies governing unredeemed gift cards, to fully understand the financial implications.

It is common in the franchise industry for franchisors to manage certain aspects of revenue distribution, particularly with gift cards and loyalty programs, to maintain brand consistency and ensure proper accounting. However, the specific terms can vary widely, so it is crucial for potential Itan franchisees to carefully review this section of the Franchise Agreement and seek legal counsel to fully understand their rights and obligations.