Does the 'Adjusted Net Operating Income' for Kidokinetics include all operating expenses?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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- "Adjusted Net Operating Income" equals Gross Sales less Disclosed Operating Expenses and Franchise Related Adjustments. Adjusted Net Operating Income is not net profit and does not include all operating expenses or any non-operating expenses such as taxes, interest, depreciation and amortization
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- Franchisees may operate in up to four territories. We allow franchisees who have purchased a Multi-Franchise to provide combined financial information to us. We do not collect or require franchisees to provide us with separate numbers for each Kidokinetics Business they operate. Because the figures above for the Dallas Location and NW Broward Location include aggregate totals for multiple Kidokinetics Businesses, these figures may include significantly higher Gross Sales and Net Operating Income than a franchisee would generate operating a single territory. A breakdown of these numbers by each Kidokinetics Business would result in significantly lower numbers.
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- The financial performance representations in Table 2 do not reflect all expenses such as taxes and amortization that must be deducted from the Gross Sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchised business. Franchisees or former franchisees, listed in the Franchise Disclosure Document, may be one source of this information.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 46–54)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, the Adjusted Net Operating Income does not include all operating expenses. The FDD specifies that the Adjusted Net Operating Income is calculated by subtracting Disclosed Operating Expenses and Franchise Related Adjustments from Gross Sales. It's explicitly stated that this figure is not net profit and excludes certain operating expenses like taxes, interest, depreciation, and amortization.
Furthermore, the Disclosed Operating Expenses used in the calculation do not include all operating expenses or costs of goods and/or services provided. Specifically, the payroll wages of the owners and managers of these Franchise Locations and certain other expenses are not included. This means that a prospective franchisee needs to account for these additional expenses when evaluating the potential profitability of a Kidokinetics franchise.
For example, the financial information provided for the Dallas Location, NW Broward Location, and North Carolina Location in Tables 2A, 2B, and 2C details various operating expenses. However, these tables also highlight exclusions and adjustments made to the expense data, such as the exclusion of personal expenses for the Dallas Location and non-standard equipment expenses for the NW Broward Location. These adjustments further emphasize that the Adjusted Net Operating Income figures presented are not a complete representation of all expenses a franchisee might incur. Therefore, a thorough independent investigation of all potential costs is essential for any prospective Kidokinetics franchisee.