Are business interruption insurance proceeds included in the Gross Sales calculation for an Aplus franchise?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
Note 1: "Gross Sales" means total amount of your sales and any merchandise inventory variation including the total amount of consideration, valued in U.S. currency, received by you for sales from or in the APLUS Store from: (a) merchandise, (b) services, (c) equipment rentals, and (d) merchandise inventory variation, if any, as further described in the Systems Manual, without deduction on account of any of the following: (a) the cost of goods sold, including taxes paid by you in procuring goods for resale; (b) the cost of material used, labor or service cost, interest paid or any other expense; or (c) the cost of transportation of the goods. Gross Sales include all barter and exchange transactions for which you furnish services or products in exchange for goods or services to be provided by the vendor, supplier or customer will be valued at the full retail value of the goods and services bartered in exchange for the good or services provided to you. Gross Sales also includes the proceeds of any business interruption insurance paid to you. Gross Sales also includes any payments you receive from vendors. Chargebacks are not deducted from Gross Sales.
The following are not included in Gross Sales: (a) gasoline, diesel, and other fuel sales (if applicable, when operating a fueling station), (b) the amount of tax imposed by the United States or any city, county, state, or other governmental entity or agency or instrumentality thereof upon or with respect to retail sales of tangible personal property measured by a stated percentage of sales price or gross receipts, whether imposed upon you as a seller or upon the customer as a purchaser; (c) any deposits refunded to customers; (d) the sale price of returned merchandise by customers when the full sale price is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price equal to
Source: Item 6 — OTHER FEES (FDD pages 16–28)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, business interruption insurance proceeds are included in the calculation of Gross Sales. Gross Sales are defined as the total amount of consideration received by the franchisee for sales from the Aplus store. This includes merchandise, services, equipment rentals, and merchandise inventory variation.
The inclusion of business interruption insurance proceeds in Gross Sales means that Aplus franchisees will pay royalties on these proceeds. This could be a significant factor during periods when a franchisee's business is disrupted due to unforeseen circumstances, as these insurance payments will increase the royalty fees owed to Aplus.
However, the FDD also specifies items that are not included in Gross Sales, such as gasoline, diesel, and other fuel sales (if applicable when operating a fueling station), sales taxes, customer deposits refunded, returned merchandise refunds, lottery and other commissions, money orders (face value), ATM income, money order fees, prepaid product sales and commissions on products from designated suppliers, federal, state and local excise taxes on cigarettes, car wash and automotive repairs, and proprietary SUNOCO food service businesses and convenience store product offerings from which no royalty is collected in accordance with the terms of the applicable participation agreement. These exclusions provide some relief to franchisees by not including these revenues in the royalty calculation.