How does 7 Brew define 'Net Sales'?

According to 7 Brew's 2025 Franchise Disclosure Document, Net Sales are defined as Gross Sales less discounts other than valid coupon credits and employee discounts. Gross Sales, in turn, is defined as the aggregate revenue from selling beverages, food, other menu items, and merchandise, whether for cash or credit. From this total, 7 Brew deducts (a) applicable sales taxes remitted to the appropriate tax authority, (b) valid coupon credits and employee discounts (capped at 2% of Gross Sales), and (c) revenue derived from selling or issuing gift cards and loyalty cards. However, revenue from customers using those gift or loyalty cards for payment is included in Gross Sales.

For a prospective 7 Brew franchisee, understanding the distinction between Gross Sales and Net Sales is crucial for accurately assessing potential revenue and profitability. The Net Sales figure provides a more realistic view of actual earnings by accounting for certain deductions from the initial Gross Sales. By excluding discounts other than coupons and employee discounts, 7 Brew provides a standardized metric for evaluating store performance across different locations.

The 2025 FDD indicates that Net Sales are used to calculate various financial performance metrics, such as Gross Profit (Net Sales less Cost of Goods Sold). Franchisees should pay close attention to these metrics, as they offer insights into the efficiency and profitability of 7 Brew stores. For example, the FDD notes that for the 180 Measured Stores, the median Net Sales margin during Fiscal Year 2024 was 97.23%.

It is important to note that while the definition of Gross Sales includes revenue from customers using gift and loyalty cards for payment, the initial revenue from selling or issuing these cards is excluded. This accounting practice can impact the timing of revenue recognition and should be considered when projecting cash flow. Prospective franchisees should carefully review the Item 19 financial performance representations in the 7 Brew FDD and consult with financial advisors to fully understand the implications of these definitions on their potential investment.