If I exchange merchandise with a customer, does it result in an exclusion from Gross Revenue for Amorino?
Amorino Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue collected from customers in the form of sales tax, federal, state, county, or city taxes, excise tax, or other similar tax collected from customers that you owe to governmental entities must be reported to us, but is excluded from Gross Revenue for the purpose of computing the royalty fee. In addition to taxes, as described in the previous sentence, the following may also be deducted from Gross Revenue: (a) The selling price of any goods returned by customers or the price charged for any services provided to customers to the extent you give any credit, discount, refund or similar allowance but an exchange of merchandise does not result in an exclusion except to the extent of any accompanying credit, discount, refund or other allowance given to the customer; (b) Items returned to their source for credit or other allowance; (c) Amounts or credits received on claims for loss or damage to merchandise or other assets of your Amorino store but not for claims for loss of business under your business interruption insurance; (d) Sales of equipment, trade fixtures or similar property not constituting merchandise of your store; (e) Transfers of merchandise to or from other Amorino facilities when those transfers are made only for the convenient operation of the concerned facilities; (f) gift certificates or similar vouchers until they are redeemed at your store. You agree to pay the Advertising Fee on a monthly basis, within 10 days of the end of each month during the term of this Agreement, with the first Advertising Fee payment due ten days after the first month (full or partial) that your Store is open.
Source: Item 22 — CONTRACTS (FDD pages 80–81)
What This Means (2025 FDD)
According to Amorino's 2025 Franchise Disclosure Document, an exchange of merchandise does not automatically result in an exclusion from gross revenue when calculating royalty fees. However, if the exchange involves any accompanying credit, discount, refund, or other allowance given to the customer, then the amount of that credit, discount, refund, or allowance can be deducted from gross revenue.
In practical terms, this means that if a customer exchanges an item for another of equal value, the initial sale remains part of Amorino's gross revenue calculation. Only the value of any discounts or refunds provided during the exchange would be subtracted. This policy ensures that Amorino franchisees pay royalties on the actual revenue they generate, while also accounting for situations where customers receive a price reduction during an exchange.
This is a fairly standard practice in franchising, as gross revenue is typically defined broadly to include all income related to the franchised business. The Amorino franchise agreement makes specific allowances for certain deductions, such as taxes and refunds, to ensure a fair calculation of royalties. Franchisees should keep accurate records of all transactions, including exchanges and any associated credits or discounts, to properly report gross revenue and calculate royalty fees.