When are Gross Revenues considered received for a Stretch Zone franchise?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
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- "Gross Revenues" means the entire amount of all of the revenues from the ownership or operation of the Franchise Business, including the proceeds of any business interruption insurance, whether the revenues are evidenced by cash, credit, checks, or gift certificates (unless exempted by us), and the fair market value of any services, property, or other means of exchange, except the amount of any sales taxes that are collected and paid to the taxing authority (based on the cash method of accounting). We allow the deduction of cash refunded, credit given to customers, and receivables uncollectible from customers in computing Gross Revenues to the extent that the cash, credit or receivables were previously included in Gross Revenues on which Royalty Fees and Advertising Contributions were paid. Gross Revenues are considered received at the time the goods, products, merchandise or services from which Gross Revenues are derived are delivered or rendered, or at the time that the relevant sale takes place, whichever occurs first.
Source: Item 19 — ITEM -19 FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 73–76)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, gross revenues are considered received when the goods, products, merchandise, or services are delivered or rendered. Alternatively, gross revenues are considered received at the time the relevant sale takes place, whichever of these events occurs first.
This definition is important for Stretch Zone franchisees because it dictates when revenue is officially recognized for royalty and advertising contribution calculations. Franchisees must pay these fees on gross revenues, so understanding the timing of revenue recognition is crucial for accurate financial reporting and compliance with the franchise agreement.
It is also important to note that Stretch Zone calculates gross revenues based on the cash method of accounting. This means that sales taxes collected and paid to the taxing authority are excluded from gross revenues. Additionally, cash refunds, credits given to customers, and uncollectible receivables can be deducted from gross revenues, provided they were previously included in gross revenues on which royalty fees and advertising contributions were paid. This ensures that franchisees are not paying royalties on revenue they did not ultimately receive.