Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
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FDD Talk 2013: Estimates of Projected Commissionable Gross Sales Net of Selling Expenses Payable to the Franchisor for a CruiseOne Franchised Business (2013 FDD)

by Franchise Chatter on July 29, 2013

in Franchise Earnings, Travel Franchise

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Highlights of CruiseOne’s Item 19 Financial Performance Representations (2013 FDD)

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Scope of Financial Performance Representations

  • To help you evaluate the franchise, in Table 1 below CruiseOne provides estimates of projected annual commissionable gross sales net of selling expenses payable to the franchisor for a CruiseOne franchised business following the first year that the breakeven point is reached.
  • CruiseOne Franchise Photo by quinetThe projections in Table 1 are not time-based, but rather a comparison of gross profit versus sales to illustrate the scalability of the franchise system. Accordingly, Table 1 is not an estimate of when you might reach the breakeven point for your Franchised Business, if ever. Table 1 is intended only to support your determination of possible financial performance once you reach the breakeven point for your Franchised Business.
  • The figures in Table 1 are only estimates of what the franchisor thinks you may earn. There is no assurance you will do as well. Actual results will vary from franchisee to franchisee.
  • Reaching the levels of revenues presented in Table 1 depends entirely on your ability to implement the company’s marketing and operational systems to develop a cruise-and-land-travel focused sales team, and to make connections in and out of your community.

Definition of Terms

  • “Annual Commissionable Gross Sales” means the total commissionable sales price quoted for the applicable Contract Year by the travel supplier (or other travel company or supplier, including travel insurers), excluding any non-commissionable line items (including taxes or port charges).
  • The “Average Commission Yield” is your expected average commission on commssionable fares from booking with preferred cruise, land, and tour suppliers. The average commission yield figure is the approximate average commission yield of all CruiseOne franchised outlets in 2012. As of December 31, 2012, CruiseOne had 773 total franchised outlets.
  • “Annual Commission Revenue” figures are calculated by multiplying the applicable Annual Commissionable Gross Sales times the Average Commission Yield.
  • You must pay the franchisor a Royalty of 3% of Annual Commissionable Gross Sales (up to a maximum of $749,999 of Annual Commissionable Gross Sales) for which there is a commission of more than 10%. Accordingly, the Royalty Fees are calculated by multiplying the applicable Annual Commissionable Gross Sales times 3%.
  • You must pay the franchisor a monthly Service Fee equal to $150. However, the Service Fee is reduced when your Gross Departed Revenue increases. Accordingly, the Service Fees are calculated by multiplying the applicable monthly Service Fee by 12.
  • You must pay the franchisor an Annual Marketing Contribution of 0.25% of Gross Departed Revenue (up to a maximum of $1,000). The franchisor deposits your contribution into a special account. You can then use this contribution towards the purchase of headquarter-developed marketing materials, marketing services, or enrollment in certain marketing programs.

Operating Costs Not Included in Financial Performance Representations

  • Table 1 does not provide estimates of your operating costs, taxes, and other expenses related to your Franchised Business that also must be deducted from the gross sales figures. Accordingly, Table 1 does not provide an estimate of your total projected net profit.
  • Operating costs typically include the following:
  • rent (if applicable)
  • your marketing and promotions
  • office supplies
  • telephone and internet
  • licenses and memberships
  • insurance
  • courier and postage
  • utilities
  • business expenses
  • gift to clients
  • repairs and maintenance
  • Table 1 also does not include commissions paid to sales associates, whom you have the option to hire pursuant to your Franchise Agreement. Of the 578 total outlets whose Franchised Businesses were in operation as of December 31, 2012, and had been in uninterrupted operation for at least 12 months, approximately 39% had sales associates, and those who had sales associates have an average of two sales associates.
  • Pursuant to your Franchise Agreement, you must also pay the franchisor $100 for each sales associate that you maintain.
  • Franchisees do not report to the franchisor the commission percentages or actual commission amounts paid to sales associates.

Table 1

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