What is the 'Net Sales' margin for 7 Brew, and how does it relate to 'Gross Sales'?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
ems appearing in the | | | Exhibit 2 statement. | |
- i. "Gross Sales" means the aggregate revenue received from selling, or providing services with respect to, beverages, food, other menu items, and merchandise, whether for cash or on credit, less (a) applicable sales taxes collected and remitted to the appropriate tax authority, (b) valid coupon credits and employee discounts deducted from revenue initially recorded as Gross Sales in an amount equal to 2% of such Gross Sales, and (c) revenue derived from selling or issuing gift cards and loyalty cards (although revenue derived from selling products and services to customers using those cards for payment is included in Gross Sales), but without deducting any other costs or expenses whatsoever. Of the 180 Measured Stores, 91 Stores (51%) exceeded the sample's average Gross Sales of $2,040,883.
- ii. Of the 180 Measured Stores, 101 Stores (56%) exceeded the sample's average Net Sales margin of 97.18%. Net Sales are Gross Sales less discounts other than valid coupon credits and employee discounts. Median Net Sales margin for the 180 Measured Stores during Fiscal Year 2024 was 97.23%. The highest Net Sales margin for any Measured Store was 99.01%. The lowest Net Sales margin for any Measured Store was 92.40%.
- iii. Of the 180 Measured Stores, 96 Stores (53%) exceeded the sample's average Cost of Goods Sold margin of 26.31%. Median Cost of Goods Sold margin for the 180 Measured Stores during Fiscal Year 2024 was 26.38%. Cost of Goods Sold means the carrying value of all inputs to goods sold, including coffee, dairy and alternative milks, sauces, syrups, teas, mixes, canned beverages, cups and straws, and supplies for sales.
- iv. Of the 180 Measured Stores, 97 Stores (54%) exceeded the sample's average Gross Profit margin of 70.87%. Median Gross Profit margin for the 180 Measured Stores during Fiscal Year 2024 was 70.95%. Gross Profit means Net Sales less Costs of Goods Sold.
- v. "Total Labor Expense" is defined as actual Store-level payroll, including the Store's general manager and benefits, payroll taxes, and bonus expense. It does not include any area manager salary or incentives. Of the 180 Measured Stores, 83 Stores (46%) exceeded the sample's average Total Labor Expense margin of 22.93% during Fiscal Year 2024. Median Total Labor Expense margin during Fiscal Year 2024 was 22.72%.
- vi. "Total Operating Expense" includes expenses such as equipment, supplies, cash-handling, credit-card processing, repairs, maintenance, third-party commissions and delivery fees, other outside services, insurance, and utilities. Royalties and marketing expenses are excluded. Of the 180 Measured Stores, 96 Stores (53%) exceeded the sample's average Total Operating Expense of 8.42% during Fiscal Year 2024. The median Total Operating Expense during Fiscal Year 2024 was 8.55%.
- vii. "Total Loyalty & Store Marketing Expense" includes expenses related to (a) our "buy 10 drinks get the 11th free" loyalty program, which is highly utilized by our repeating customer base, (b) our Community Outreach program, which gives discounts to service men and women from the community, and (c) Store-level marketing expenses. It does not include any Brand Fund contributions. Of the 180 Measured Stores, 78 Stores (43%) exceeded the sample's average Total Loyalty and Store Marketing Expense of 10.18% during Fiscal Year 2024. Median Total Loyalty & Store Marketing Expense during Fiscal Year 2024 was 10.00%.
- viii. Of the 180 Measured Stores, 90 Stores (50%) exceeded the sample's average Store-Level EBITDAR margin of 29.34% during Fiscal Year 2024. Median Store-Level EBITDAR margin during Fiscal Year 2024 was 29.34%. "Store-Level EBITDAR" is calculated by subtracting Total Labor Expense, Total Operating Expense, and Total Loyalty & Store Marketing Expense (as defined in notes v, vi, and vii above, respectively) from Gross Profit.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 61–73)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, Net Sales are calculated as Gross Sales less discounts, excluding valid coupon credits and employee discounts. For the 162 franchised stores analyzed, the average Net Sales margin was 97.05%. Specifically, 56% of these franchised stores exceeded this average. The median Net Sales margin for franchised stores during the 2024 fiscal year was 97.20%, with the highest margin reaching 99.01% and the lowest at 92.40%.
For the 18 company-owned stores, the average Net Sales margin was slightly higher at 98.07%, with 56% of company stores exceeding this average. The median Net Sales margin for company stores in 2024 was 98.23%, with a high of 98.82% and a low of 94.78%. These figures indicate that, on average, 7 Brew stores retain a significant portion of their gross revenue as net sales after accounting for discounts.
Across all 180 measured stores (both franchised and company-owned), the average Net Sales margin was 97.18%, with a median of 97.23%. The highest Net Sales margin among all measured stores was 99.01%, and the lowest was 92.40%. This consistent performance between franchised and company-owned stores suggests a stable pricing and discount strategy across the 7 Brew system. Prospective franchisees should note that while the Net Sales margin is high, it does not account for other operating expenses or costs of goods sold, which will further impact profitability.
Gross Sales for 7 Brew is defined as the aggregate revenue from selling beverages, food, other menu items, and merchandise, whether for cash or credit. Gross Sales are calculated before deducting most expenses, but after subtracting (a) applicable sales taxes, (b) valid coupon credits and employee discounts (capped at 2% of Gross Sales), and (c) revenue from selling gift cards and loyalty cards. However, revenue derived from customers using gift cards and loyalty cards for payment is included in Gross Sales. The Net Sales margin represents the percentage of Gross Sales that remains after deducting discounts (other than coupon credits and employee discounts), providing a clearer picture of revenue retention before other expenses are considered.