What is included in the definition of 'Gross Revenues' 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" encompasses the total income derived from operating the Franchise Business. This includes all revenues, whether received as cash, credit, checks, or gift certificates (unless Stretch Zone specifically exempts certain gift certificates). It also factors in the fair market value of any services, property, or other forms of exchange. Business interruption insurance proceeds are also included in gross revenues. However, sales taxes collected and paid to the taxing authority are excluded from the calculation, based on the cash method of accounting.
Stretch Zone permits deductions from Gross Revenues for cash refunds, credits given to customers, and receivables deemed uncollectible, but only if these amounts were previously included in Gross Revenues and were subject to Royalty Fees and Advertising Contributions. Gross Revenues are considered received when the goods, products, merchandise, or services are delivered or rendered, or when the sale occurs, whichever happens first.
For a prospective Stretch Zone franchisee, understanding this definition is crucial because royalty fees and advertising contributions are typically calculated as a percentage of Gross Revenues. Therefore, accurately tracking and reporting all forms of revenue is essential for compliance and financial planning. Franchisees should also be aware of the allowable deductions and the timing of revenue recognition to ensure accurate reporting and avoid potential discrepancies.