How is 'Gross Sales' defined for the purpose of calculating 7 Brew royalty fees?
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) proceeds from insurance, excluding business interruption insurance; and
- (iii) proceeds from any civil forfeiture, condemnation, or seizure by government entities.
In addition, Gross Sales are reduced by the value of employee discounts and promotional or marketing discounts offered to the public not exceeding, in the aggregate, two percent (2%) of the Store's weekly Gross Sales. Each charge or sale upon credit will be treated as a sale for the full price on the day the charge or sale is made, regardless of when you receive payment (whether full or partial, or at all) on that sale. Revenue from gift/loyalty/stored-value cards and similar items we approve for offer and sale at 7 BREW Stores is included in Gross Sales when the card or other item is used to pay for products and services.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, "Gross Sales" is defined as the total income from all sources. This includes revenue from the sales of products, services, and merchandise, as well as any other revenue received, including proceeds from business interruption insurance. If 7 Brew permits bartering, the value of products or services bartered for the store's offerings is also included in Gross Sales. For sales on credit, the full price is counted on the day of the sale, regardless of when payment is received. Revenue from gift, loyalty, or stored-value cards is included when the cards are used for payment.
However, the 7 Brew definition of Gross Sales does allow for some exclusions. Specifically, it excludes sales, use, or service taxes that are collected from customers and paid to the appropriate taxing authority. It also excludes proceeds from insurance, except for business interruption insurance, and proceeds from civil forfeiture, condemnation, or seizure by government entities. Additionally, the definition allows for a reduction in Gross Sales for employee discounts and promotional or marketing discounts offered to the public, but these discounts cannot exceed 2% of the store's weekly Gross Sales in total.
It is important to note that 7 Brew retains the right to modify its policies regarding revenue recognition and the inclusion or exclusion of certain revenue from Gross Sales as business practices and technology evolve. This means that the specific items included or excluded from Gross Sales could change over time, potentially impacting the royalty fees a franchisee owes. A prospective franchisee should stay informed of any such changes to accurately calculate and pay royalties.