What is the definition of Gross Receipts for a Jersey Mikes franchise, as it relates to advertising payments?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
d Franchisee shall pay via its automatic clearing house (ACH) account as described in Section 11.2.
- 10.4 Franchisee shall pay one percent (1.0%) of Franchisee's Gross Receipts, as definedin Section 11.1, to the Corporate Advertising and Development Fund, in addition to any payments and expenditures required by Sections 10.5 and 10.6. Franchisee's required payments to the Corporate Advertising and Development Fund shall be made at the same time and in the same manner as, and in addition to, the Continuing Royalty Fee provided in Section 11. Up on ninety (90) days' written notice, Franchisor may change the amount of Franchisee's payment to the Corporate Advertising and Development Fund, provided, however, that in no event shall Franchisee's payments to the Corporate Advertising and Development Fund, National Media Fund, and Cooperative Advertising Fund exceed six percent (6%) of Franchisee's Gross Receipts. Franchisor may reallocate funds in the Corporate Advertising and Development Fund to the National Media Fund or Cooperative Advertising Fund in its sole and absolute discretion.
The Corporate Advertising and De velopment Fund shall be maintained a nd administered by Franchisor or its designee, as follows:
- a. Franchisor shall direct all advertising programs with sole discretion over the creative concepts, materials and media used in such programs and the placement and allocation of such programs.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mikes's 2025 Franchise Disclosure Document, Gross Receipts are central to calculating both royalty and advertising fees. Specifically, franchisees must pay 1% of their Gross Receipts to the Corporate Advertising and Development Fund, in addition to other advertising expenditures. This payment is made at the same time and manner as the continuing royalty fee. Jersey Mikes retains the right to modify the amount contributed to the Corporate Advertising and Development Fund with a 90-day written notice. However, the total payments to the Corporate Advertising and Development Fund, National Media Fund, and Cooperative Advertising Fund cannot exceed 6% of the franchisee's Gross Receipts. Jersey Mikes also has the discretion to reallocate funds among these advertising funds.
The 2025 FDD defines "Gross Receipts" as the total revenue from all sales of food, beverages, merchandise, products, and services to customers, whether sold at the Jersey Mikes restaurant or through off-site or catering sales. This total includes all sales, regardless of whether they comply with the franchise agreement. The only deductions allowed from this total are sales, use, or service taxes collected and paid to the appropriate taxing authority, as well as customer refunds, discounts, and coupons.
For a prospective Jersey Mikes franchisee, understanding this definition is crucial because it directly impacts the amount of royalty and advertising fees they will owe. By including all sales, even those made off-site, the definition ensures that Jersey Mikes receives a percentage of all revenue streams generated by the franchise. The deductions allowed are fairly standard in the franchise industry, as they account for taxes and customer incentives that reduce the actual revenue received by the franchisee. Franchisees should be aware that Jersey Mikes has the right to increase the advertising contribution, although there is a cap of 6% on the total advertising fees.