What is included in the definition of 'Gross Sales' for an Itan franchise?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Definitions: As used in this Disclosure Document, the following capitalized terms have the meanings given to them below:
- "Brand Fund" means the brand and system development fund we currently administer to promote public recognition of our brand and improve our System.
- "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, Gross Sales are comprehensively defined for the purpose of calculating royalties and other fees. Gross Sales include all gross sums billed or collected from goods and services sold, plus all other sums collected from the operation of the salon. This encompasses advertising revenue, sponsorship fees, and business interruption insurance proceeds. This broad definition ensures that Itan receives a percentage of nearly all revenue streams generated by the franchise.
However, the definition of Gross Sales also specifies certain exclusions. Itan franchisees do not have to include sales or use taxes, amounts refunded to customers, revenue from the sale of furniture, fixtures, and equipment in the ordinary course of business, and tips paid to and retained by staff members as a gratuity. These exclusions provide some relief to the franchisee, as these amounts are not subject to royalty fees.
The FDD also indicates that the Itan manual may include policies governing the treatment of gift card proceeds for Gross Sales calculations. The manual may also provide details on calculating Gross Sales relating to membership fees and qualifying purchases and redemptions by members under a customer loyalty or membership program. Franchisees should carefully review the manual to fully understand how these items are treated when calculating Gross Sales, as these details can impact the royalty fees owed to Itan.