How does the definition of Gross Revenues for Ledgers in Item 6 relate to the franchisee's obligation to maintain adequate insurance coverage as described in Item 9?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
ntentionally Blank]
ITEM 6 OTHER FEES
| Fee | Amount | Due Date | Remarks | |---|---|---|---| | Royalty Fee (Notes 1 and 2) | The Royalty Fee is 10% of Gross Revenues | | See Note 1 for a definition of Gross Revenues. | | | | | | | | | | | | | | | | | | | | | | Advertising Fee | 3% of the previous month’s Gross Revenues | Monthly | You agree to pay this fee to us to support our advertising program. | | Credit Card Processing Fee | The actual amount charged by third party credit card processor The actual amount charged by third party credit card processor | As incurred | | | Central Processing Services Fee | Then current rate based on the service requested (up to 40% of our-then current Recommended Fee (Note 3) | As incurred | You agree to pay this fee to us for any central processing services we provide to your clients on your behalf. | | | | | | | | | | | | Insufficient | $50 per transaction $50 per transaction | As incurred | | | Funds Fee | | | | | Audit Fee | Cost of Audit plus $50 per month Late Fee on any late payment | Immediately upon conclusion of audit | | | Transfer Fee | $5,000 for a transfer of the franchise or a majority interest in it. | Due before transferring | We must approve the transfer. | | Interest and | Actual amount | As incurred | | | Penalties | incurred Actual amount incurred | | | | Client Refunds | The amount of any fee we refund to a client | As invoiced | | | Fee | Amount | Due Date | Remarks | | Assistance Fee in the event of death or incapacity | Our reasonable expenses plus 10% of Gross Revenues for the period in which we operate or assist in the operation of the Franchised Business. | At time of expense | We are entitled to this fee if we must operate your franchise due to your death or incapacity. | | On-Site Training | $500 per half day per person plus travel expenses | As incurred | We are entitled to this fee if we provide on-site training at your request at your Franchised Business. | | Sales, Excise, or Gross Receipts tax | Actual amount of tax paid | At time of payment of fees to us which are subject to any tax | If required by the state or locality in which your franchise is located, the initial franchise fee, advertising fee, and possibly other fees will be subject to sales or gross receipts tax. | | Third party charges that we incur on your behalf | Actual amount of charge | At time of expense | If we incur third party charges on your behalf, you agree to reimburse us for any such charges. | | Late Fee | Lesser of 1.5% per month or the highest rate allowable by law of the state where franchised is located | As incurred. | Applies to amounts owed to us that are five (5) or more days past due. | | Indemnity | Actual loss sustained | At time of expense | You must indemnify us from any loss caused by your operation of the Franchised Business. | | Attorney Fees and Costs | Actual amount incurred | At time of expense | If we are the substantially prevailing party in litigation with you, or you bring a claim against an Area Representative, you agree to pay our costs and attorney fees. | *Except where otherwise specified, we uniformly impose and collect all the fees in this table, you pay them to us, and we do not refund them.
Note 1: "Gross Revenues" is defined as all revenues that you derive or receive, directly or indirectly, from the operation of the Franchised Business, excluding only sales and use taxes.
Note 2: Before you may open for business, you must sign and deliver to us all bank documents needed to permit us to debit your bank account via ACH Electronic Transfer for all fees and payments due to us. If you change your bank account or transfer your account to a different bank, you must notify us within one day, and sign and deliver to us and the bank new documents to permit us to debit your bank account within three days. We require you to execute an Automatic
Bank Draft Authorization and pay most fees to us via ACH electronic funds transfer. See Schedule 2 to the Franchise Agreement.
Note 3: Ledgers' Central Processing Services is a centralized support system offered by us to enhance efficiency and service quality across the franchise network. Through this program, we offer to provide certain personal and business tax preparation, bookkeeping, and business planning services directly to clients on your behalf utilizing a joint engagement form. We publish an annual price list for the then-current services offered by us, which may vary from time to time. Each service offered by us includes a recommended fee for you to charge your clients (the "Recommended Fee") and includes the fee we charge for the services (the "Central Processing Services Fee"). We do not currently require you to utilize our Central Processing Services, but we reserve the right to do so.
[The Remainder of Page Intentionally Blank]
ITEM 7 ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT
| Type of Expenditure | Low | High | Method of payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee (Note 1) | $15,000 | $35,000 | Check or EFT | At signing of Franchise Agreement. |
What This Means (2025 FDD)
According to Ledgers's 2025 Franchise Disclosure Document, the franchisee's Gross Revenues directly impact certain fees paid to the franchisor, which in turn indirectly relates to the franchisee's obligation to maintain adequate insurance coverage. The Royalty Fee and Advertising Fee are calculated as a percentage of Gross Revenues. Specifically, the Royalty Fee is 10% of Gross Revenues, and the Advertising Fee is 3% of the previous month’s Gross Revenues.
Item 9 outlines the franchisee's obligations, referencing Section 4.8 of the Franchise Agreement, which pertains to insurance. Item 8 specifies that franchisees must obtain and maintain insurance coverage as required by state laws and as mandated by Ledgers, which may exceed state law requirements. These insurance policies must name Ledgers as an additional insured party. The required insurance includes "all risk" property insurance, workers' compensation insurance ($100,000 minimum), comprehensive general liability insurance ($1,000,000 minimum per occurrence), business interruption insurance, commercial automobile liability insurance ($1,000,000 minimum), and professional liability insurance ($1,000,000).
While the definition of Gross Revenues in Item 6 does not explicitly state a direct relationship to the insurance requirements in Item 9, a higher Gross Revenue implies a larger, more active business, which could potentially increase the risk exposure and the need for more comprehensive insurance coverage. Although the FDD does not state that the level of insurance required is directly tied to gross revenues, it is common practice that larger businesses with higher revenues typically carry higher insurance coverage limits to protect against potential liabilities. Therefore, while not explicitly stated, a successful Ledgers franchise with substantial Gross Revenues may find it prudent to exceed the minimum insurance requirements to adequately protect their business assets and manage risks effectively.