What expenses are excluded from 'Total Operating Expense' for 7 Brew stores?

According to 7 Brew's 2025 Franchise Disclosure Document, "Total Operating Expense" includes various costs such as equipment, supplies, cash handling, credit card processing, repairs, maintenance, third-party commissions and delivery fees, outside services, insurance, and utilities. However, the document explicitly states that royalties and marketing expenses are excluded from this category. This means that when calculating the total operating expenses for a 7 Brew franchise, franchisees should not include the royalty fees paid to the franchisor or any marketing expenses incurred.

For a prospective franchisee, understanding which expenses are included and excluded from "Total Operating Expense" is crucial for accurate financial planning and performance analysis. By excluding royalties and marketing expenses, 7 Brew provides a clearer picture of the direct operational costs associated with running the store. This distinction allows franchisees to better assess the profitability of their store before accounting for royalty obligations and marketing investments.

It's important to note that while marketing expenses are excluded from "Total Operating Expense", the FDD also mentions a separate category called "Total Loyalty & Store Marketing Expense". This category includes expenses related to the loyalty program, community outreach, and store-level marketing activities, but it specifically excludes any Brand Fund contributions. Therefore, franchisees need to carefully track and categorize their expenses to align with 7 Brew's definitions and financial reporting standards.

Additionally, the FDD omits rent expense from its calculations due to the wide variation in rental payment amounts across different locations. This variation arises from different rental structures, such as ground leases, build-to-suit arrangements, and properties purchased by affiliates or directly by the store operator. 7 Brew generally advises that rent expense should be no more than 5% of the store's gross sales, but franchisees must independently manage and account for their rent expenses based on their specific circumstances.