Are chargebacks deducted from Gross Sales when calculating royalties 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.
Source: Item 6 — OTHER FEES (FDD pages 16–28)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, chargebacks are not deducted from gross sales when calculating royalties. Gross sales are defined as the total amount of sales and any merchandise inventory variation, including the total amount of consideration received for sales from the Aplus store. This includes sales from merchandise, services, equipment rentals, and merchandise inventory variation.
The FDD specifies that gross sales are calculated without deductions for the cost of goods sold, material used, labor or service costs, interest paid, or any other expenses, including transportation costs. Gross sales also encompass barter and exchange transactions, business interruption insurance proceeds, and payments received from vendors.
This means that Aplus franchisees must pay royalties on the total revenue generated before any deductions for chargebacks. This could impact the franchisee's profitability, as they are paying royalties on sales for which they may not ultimately receive revenue. Franchisees should factor this into their financial projections and understand how chargebacks may affect their royalty obligations.