Are third-party delivery service fees deducted when calculating 'Revenue' for Afuri Ramen Dumpling?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
- Revenue and Reporting. "Revenue" means all receipts generated by the franchise from any source including sales, exchanges, services, sales from delivery services (including direct delivery and delivery via third-party delivery services, without deducting third-party delivery service fees), or any other benefit or value that is received or deferred to be received. Credit sales shall be calculated as of the date of sale without deduction for uncollected credit accounts. "Revenue" shall not include bona fide credits for returns, promotional discounts, or the amounts collected and paid to appropriate governmental authorities under the provisions of any Sales Tax, Retailer's Occupation, or similar Act. The proceeds from any business interruption insurance or eminent domain recovery you receive are included in "Revenue."
Source: Item 6 — Other Fees (FDD pages 11–16)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, the calculation of "Revenue" for royalty fee purposes does not allow for the deduction of third-party delivery service fees. This means that Afuri Ramen Dumpling franchisees must include the total sales amount generated through these services when calculating their monthly revenue, before any deductions for the fees charged by the delivery companies.
This policy has a direct impact on the royalty fees that Afuri Ramen Dumpling franchisees pay. Since the royalty fee is a percentage of monthly revenue (5%, as detailed elsewhere in the Item 6 table), a higher revenue figure due to the inclusion of third-party delivery service sales directly translates to higher royalty payments. Franchisees need to factor this into their financial planning and operational decisions, as it affects their overall profitability.
For a prospective Afuri Ramen Dumpling franchisee, understanding this aspect of revenue calculation is crucial. It is important to consider the volume of sales expected through third-party delivery services and the associated costs, as these will not reduce the royalty fee liability. This contrasts with typical franchise agreements where certain costs are deducted from gross revenue before calculating royalties. Franchisees should analyze the potential impact of this policy on their profit margins and ensure that their pricing strategy accounts for both the delivery service fees and the non-deductible nature of these fees for royalty calculations.