How does Kidokinetics define 'Gross Sales' for the purposes of financial reporting?

According to Kidokinetics's 2024 Franchise Disclosure Document, Gross Sales are defined as the revenues received from all goods, services, and products sold at, from, or through the Kidokinetics business, or made pursuant to the rights granted under the franchise agreement. This includes all other income related to the Kidokinetics business, regardless of whether it's from cash or credit, and regardless of whether collection has occurred in the case of credit sales. The definition also specifies that the full redemption value of any gift card, gift certificate, or coupon sold for use in the Kidokinetics business is included in Gross Sales, even if third-party sellers retain fees. Proceeds from business interruption insurance are also included.

However, the definition of Gross Sales for Kidokinetics excludes certain items. Specifically, it does not include any sales tax or other taxes collected from customers that are then turned over to the appropriate governmental authority. It also excludes properly documented refunds to customers and properly documented employee discounts, although employee discounts are limited to 3% of Gross Sales. The inclusion of gift card and gift certificate sales is specified to occur at the time the franchisee receives the funds from the purchase of these items.

For a prospective Kidokinetics franchisee, understanding this definition is crucial because Gross Sales figures are used to calculate royalty fees, advertising contributions, and other financial obligations to Kidokinetics. Accurately tracking and reporting Gross Sales is essential for compliance with the franchise agreement and for assessing the financial performance of the business. Franchisees should pay close attention to what is included and excluded to ensure accurate reporting and avoid potential disputes with the franchisor.