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FDD Talk 2013: Average Annual Gross Sales and Instructor Wages for KidzArt Franchised Businesses (2013 FDD)

by Franchise Chatter on November 21, 2013

in Art-Related Franchise, Child-Related Franchises, Franchise Earnings



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Highlights of KidzArt’s Item 19 Financial Performance Representations (2013 FDD) – Part 1

  • This Item sets forth certain historical revenue information for 36 franchisee-owned Franchised Businesses (“Reporting Franchisees”) that responded to the franchisor’s request for certain performance data for the 2012 calendar year (the “Measurement Period”).
  • Kidz ArtThe franchisor requested such data from all of its franchisees and the Reporting Franchisees in this Item represent the franchisees who submitted the requisite information. The franchisor has excluded franchisees who failed to respond to it in advance of the applicable deadline to be included in this Item.
  • The franchisor has presented separate information for the “Teach” and “Teach Plus” franchises. The primary difference between them is the size of the territory granted. The territory of a KidzArt Teach Plus franchise has a population of approximately 30,000 qualifying households. The territory of a KidzArt Teach franchise has a population of approximately 5,000 qualifying households.
  • The franchisor no longer makes this distinction when selling franchises. The franchisor now includes with each new franchise an exclusive territory with a population of approximately 15,000 qualifying households.

Explanatory Notes for Part I – Annual Gross Revenue and Annual Instructor Wages

Annual Gross Revenue

  • Annual Gross Revenue is defined in your franchise agreement as the total of all sales made in the operation of the Franchised Business, whether collected or not.
  • Annual Gross Revenue does not include:  (i) federal, state, or municipal sales or use taxes collected from customers for payment to the appropriate taxing authorities; (ii) promotional or discount coupons to the extent that no revenue is realized; (iii) compensation for services or products provided to your employees if you did not charge the employee, or for any portion not paid for by an employee; or (iv) actual customer refunds, adjustments, and credits to the extent they were previously included in Gross Revenue on which a royalty was paid.
  • The Average Annual Gross Revenue is defined as the sum of the Annual Gross Revenues of the Reporting Franchisees for each offering (i.e. “Teach” vs. “Teach Plus”), divided by the number of Reporting Franchisees for each offering.
  • The Median Annual Gross Revenue means the amount that falls in the middle when all other amounts disclosed are arranged highest to lowest. In other words, half of the Reporting Franchisees exceeded the median value and half did not (for each offering).
  • Of the 10 Reporting Franchisees operating a KidzArt “Teach” Franchise, 4 Reporting Franchisees, or 40%, exceeded the Average Annual Gross Revenue.
  • Of the 26 Reporting Franchisees operating a KidzArt “Teach Plus” Franchise, 6 Reporting Franchisees, or 23%, exceeded the Average Annual Gross Revenue.

Annual Instructor Wages

  • The Average Annual Instructor Wages is defined as the sum of the instructor wages paid during the Measurement Period by the Reporting Franchisees for each offering (i.e. “Teach” vs. “Teach Plus”), divided by the number of Reporting Franchisees for each offering.
  • Although you will most likely pay substantially less Annual Instructor Wages under a “Teach” franchise, your Gross Revenue will most likely be much higher under the “Teach Plus” franchise.
  • The Average Annual Instructor Wages takes into account two Reporting Franchisees in each franchise category that paid zero Instructor Wages over the Measurement Period, meaning that each of these Reporting Franchisees did not pay any third party instructor wages during the Measurement Period.
  • The Median Annual Instructor Wages means the amount that falls in the middle when all other amounts disclosed are arranged highest to lowest. In other words, half of the Reporting Franchisees exceeded the median value and half did not (for each offering).
  • Of the 10 Reporting Franchisees operating a KidzArt “Teach” Franchise, 3 Reporting Franchisees, or 30%, exceeded the Average Annual Instructor Wages.
  • Of the 26 Reporting Franchisees operating a KidzArt “Teach Plus” Franchise, 7 Reporting Franchisees, or 27%, exceeded the Average Annual Instructor Wages.

Part I – Annual Gross Revenue and Annual Instructor Wages

Annual Gross Revenue

Teach



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