Does 7 Brew consider proceeds from business interruption insurance as revenue?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
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Each calendar week currently begins on Monday and ends on Sunday, although upon notice to you we may change the first and last days of each calendar week for Royalty (and other payment) calculation purposes.
In this Agreement, "Gross Sales" means the aggregate amount of all revenue and other consideration generated from any source, including, without limitation, from selling products, services, and merchandise; other types of revenue you receive, including the proceeds of business interruption insurance; and (if barter is permitted by us) the value of products, services, and merchandise bartered in exchange for the Store's products, services, or merchandise.
However, Gross Sales exclude:
- (i) federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority;
- (ii)
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the definition of "Gross Sales" includes proceeds from business interruption insurance. Gross Sales is a crucial figure because it is used to calculate royalty fees and technology fees payable to 7 Brew.
Specifically, the 7 Brew franchise agreement states that Gross Sales means the aggregate amount of all revenue and other consideration generated from any source. This includes revenue from selling products, services, and merchandise, as well as other types of revenue received, including proceeds from business interruption insurance. The inclusion of business interruption insurance proceeds in Gross Sales means that franchisees will have to pay royalty and technology fees on these proceeds.
However, the agreement also specifies exclusions from Gross Sales. Proceeds from insurance, excluding business interruption insurance, are excluded from the calculation of Gross Sales. This distinction clarifies that while business interruption insurance is included, other types of insurance proceeds are not. Additionally, federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, and proceeds from any civil forfeiture, condemnation, or seizure by government entities are also excluded from Gross Sales.
7 Brew also reserves the right to modify its policies and practices regarding revenue recognition, revenue reporting, and the inclusion or exclusion of certain revenue from "Gross Sales" as circumstances, business practices, and technology change. This means that the definition of Gross Sales and what is included or excluded can change over time, potentially impacting the amount of royalty and technology fees franchisees will owe.