How are customer refunds handled when reporting Gross Sales for a 360 Painting franchise?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
For purposes of reporting Gross Sales, all revenues must be recorded upon receipt and any approved refunds to customers shall be deducted from revenues when the refund is tendered.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, 360 Painting franchisees must record all revenues upon receipt. When reporting Gross Sales, any approved refunds to customers are deducted from revenues when the refund is given. This means that the franchisee only pays royalties on the net sales amount after deducting any customer refunds.
This policy is fairly standard in franchising, as it ensures that franchisees are not paying royalties on revenue they ultimately did not retain due to refunds. It is important to note that the refunds must be 'approved,' which likely means that 360 Painting has a system in place for authorizing refunds to prevent abuse of the deduction.
It is important for prospective franchisees to understand the specific procedures for obtaining approval for customer refunds, as well as any documentation requirements. This will ensure accurate reporting of Gross Sales and avoid any potential disputes with 360 Painting regarding royalty payments.